LO-1.
P1.1 : Explain the principles of management (that have evolved throughout the history of organization since the industrial revolution) used in the construction and built environment sector and especially to your construction organization. (P1.1 M1.3)
Management is a process of designing and maintaining an environment in which individuals work together in groups to effectively and efficiently accomplish selected aims. In other word we can say Management is a set of activities directed at an organizations resources with the aim of achieving organizational goals in an efficient and effective manner.
Management is consist of Forecasting, Planning, Organizing, Staffing or Directing, Motivation, coordinating and Controlling. (5)
Forecasting: Forecasting is a decision-making tool used by many businesses to help in budgeting, planning, and estimating future growth. In the simplest terms, forecasting is the attempt to predict future outcomes based on past events and management insight.
(6)Demand forecasting might be simple in stable environments where the future very closely resembles the past. Most small business owners learn early on, however, that the future rarely replicates the past. As a result, demand forecasting -- the ability to predict future sales -- is a critical skill. Equally important is the selection of a forecasting technique, such as structured analogies or judgmental decomposition, that will help you identify the rate of change from your market's current level of demand to its future demand level.
Structured Analogies : A small business might find the past useful in predicting the future, if the past marketing scenario is similar to a future situation. In this case, a business might rely on an expert skilled in the use of structured analogies to forecast demand. For example, the expert might estimate the probable demand for a product the company will introduce in one regional market based on his review of historical data regarding the introduction of similar products in other regional markets. Assuming the expert has experience with analogous situations, he will be able to gauge the similarities between the proposed and prior product introductions. Based on these similarities or differences, the expert will consider to what degree the probable outcome of the new product introduction will mirror the outcomes of previous product introductions. The expert will then create a demand forecast as determined by the most similar analogies
Judgmental Decomposition: To apply the judgmental decomposition demand forecasting technique, a small business owner reconstructs a marketing scenario and addresses each element of the scenario separately. The leader then combines the individual forecasts to yield the demand forecast for a particular product or service. For example, to forecast the sales revenues for a brand, the leader will forecast the sales volume for the industry, estimate the company’s market share and the per-unit sales price. The leader will then multiply the company’s market share by the per-unit sales price to determine the forecasted sales revenues for the brand.
Expectations Survey :Using an expectations survey, the existing and potential customers of a small business are asked to state how they might behave in a particular situation. The expectations of those individuals surveyed reflect their beliefs about some future event that may and may not happen. For example, a customer might be asked whether she expects to attend a wedding in the next six months. In this instance, the customer might consider the fact that she has several friends, relatives or coworkers who are engaged, so her expectation might be that it's highly probable the event will occur. She might then respond to the survey by selecting the response “10” that indicates the customer expects to attend a wedding in the next six months.
Market Segmentation: Segmentation allows a small business owner to divide a problem into separate parts and develop forecasts for each part using a preferred forecasting technique. The individual forecasts are then combined to create a complete demand forecast. For example, a small jewelry store chain might create a forecast for the sale of a luxury watches for each location, and then add all the forecasts together to create a forecast for all locations. Other segments might also be used, such as geographic or climatic regions and regions divided by demographics, including age or employment status.
Planning: A basic management function involving formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources. The planning process
Identifies the goals or objectives to be achieved,
Formulates strategies to achieve them,
Arranges or creates the means required, and
Implements, directs, and monitors all steps in their proper sequence.
In short if we can say it as, The process of making plans for something.
Organizing: This refers to the structures which results from identifying and grouping the works, defying and delegating the responsibility and authority and establishing relationships.
When organizing a business it should be provided with things that are necessary for functioning. For examples :- a) Personnel (Workers)
b) Raw Materials
c) Machineries.
d) Capitals.
Staffing: The selection and training of individuals for specific job functions, and charging them with the associated responsibilities.
Motivation : Often, people confuse the idea of 'happy' employees with 'motivated' employees. These may be related, but motivation actually describes the level of desire employees feel to perform, regardless of the level of happiness. Employees who are adequately motivated to perform will be more productive, more engaged and feel more invested in their work. When employees feel these things, it helps them, and thereby their managers, be more successful.
It is a manager's job to motivate employees to do their jobs well. So how do managers do this? The answer is motivation in management, the process through which managers encourage employees to be productive and effective. (3)
Coordination : Coordination is a process to establish harmony among the different activities of an organization, so that the desired objectives can be achieved. Definitions of coordination present the following facts about its characteristics:
Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing, directing and controlling. That is why, co-ordination is not a separate function of management because achieving of harmony between individuals efforts towards achievement of group goals is a key to success of management. Co-ordination is the essence of management and is implicit and inherent in all functions of management.(4)
Controlling: Control, or controlling, is one of the managerial functions like planning, organizing, staffing and directing. It is an important function because it helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in a desired manner.
According to modern concepts, control is a foreseeing action whereas earlier concept of control was used only when errors were detected. Control in management means setting standards, measuring actual performance and taking corrective action.
Changes in the global economy have reshaped the modern-day workforce, causing organizations and companies to reassess how they manage and motivate their employees. Effectively managing a workforce hinges on understanding how each employee operates and performs, and on providing an environment in which all employees can thrive and succeed for the betterment of the company.
Henri Fayol (Istanbul, 29 July 1841 – Paris, 19 November 1925) was a French mining engineer and director of mines who developed a general theory of business administration that is often called Fatalism. He and his colleagues developed this theory independently of scientific management but roughly contemporaneously. Like his contemporary, Frederick Winslow Taylor, he is widely acknowledged as a founder of modern management methods. (2)
Management principles are guidelines for the decisions and actions of managers. They were derived through observation and analysis of events faced in actual practice.
The Principles of Management are the essential, underlying factors that form the foundations of successful management. According to [Henri Fayol].
Division of Work (1)
The specialization of the workforce according to the skills of a person , creating specific personal and professional development within the labor force and therefore increasing productivity; leads to specialization which increases the efficiency of labor. By separating a small part of work, the workers speed and accuracy in its performance increases. This principle is applicable to both technical as well as managerial work,. this can be made useful in case of project works too. Planning is to decide what to do before *
Authority and Responsibility
The issue of commands followed by responsibility for their consequences. Authority means the right of a superior to give enhance order to his subordinates; responsibility means obligation for performance. This principle suggests that there must be parity between authority and responsibility. They are co-existent and go together, and are two sides of the same coin. and the authority must be commensurate with responsibility
Discipline
Discipline refers to obedience, proper conduct in relation to others, respect of authority, etc. It is essential for the smooth functioning of all organizations. This will also help shape the culture inside the organization.
Unity of Command
This principle states that every subordinate should receive orders and be accountable to one and only one superior. If an employee receives orders from more than one superior, it is likely to create confusion and conflict. Unity of Command also makes it easier to fix responsibility for mistaken the authority should be commensurate with responsibility
Unity of Direction
All those working in the same line of activity must understand and pursue the same objectives. All related activities should be put under one group, there should be one plan of action for them, and they should be under the control of one manager.
It seeks to ensure unity of action, focusing of efforts and coordination of strength.
Subordination of Individual Interest
The management must put aside personal considerations and put company objectives first. Therefore the interests of goals of the organization must prevail over the personal interests of individuals.
Remuneration
Workers must be paid sufficiently as this is a chief motivation of employees and therefore greatly influences productivity. The quantum and methods of remuneration payable should be fair, reasonable and rewarding of effort. Remuneration is paid to worker as per their capacity and productivity. The main objective of an organization is to maximize the wealth and the net profit as well. For this purpose, the organization has paid wages, salary, and benefit to their staff properly and scientifically so that organizational efficiency can be ensured.
The Degree of Centralization
The amount of power wielded with the central management depends on company size. Centralization implies the concentration of decision making authority at the top management. Sharing of authority with lower levels is called decentralization. The organization should strive to achieve a proper balance.
Scalar Chain
Scalar Chain refers to the chain of superiors ranging from top management to the lowest rank. The principle suggests that there should be a clear line of authority from top to bottom linking all managers at all levels. It is considered a chain of command. It involves a concept called a "gang plank" using which a subordinate may contact a superior or his superior in case of an emergency, defying the hierarchy of control. However the immediate superiors must be informed about the matter
Order
Social order ensures the fluid operation of a company through authoritative procedure. Material order ensures safety and efficiency in the workplace. Order should be acceptable and under the rules of the company
Equity
Employees must be treated kindly, and justice must be enacted to ensure a just workplace. Managers should be fair and impartial when dealing with employees, giving equal attention towards all employees.
Stability of Tenure of Personnel
The period of service should not be too short and employees should not be moved from positions frequently. An employee cannot render useful service if he is removed before he becomes accustomed to the work assigned to him.
Initiative
Using the initiative of employees can add strength and new ideas to an organization. Initiative on the part of employees is a source of strength for organization because it provides new and better ideas. Employees are likely to take greater interest in the functioning of the organization.
Esprit de Corps
This refers to the need of managers to ensure and develop morale in the workplace; individually and communally. Team spirit helps develop an atmosphere of mutual trust and understanding.
Conclusion : For achieving success management has to be strong and well organized. But following the management principals one could use it as a guideline for start and improve significantly. Depending on the situation and analyzing the different factor
P1.2 : Management is a process of Planning, Organizing, Leading and Controlling an organization’s key resources such as human, financial, and material resources in order to achieve organizational goals in an efficient and effective manner. In modern day organizations and thinking believe that the human resources perspective or the Human Resources Management (HRM) is an important function of the overall organization (such as a construction business) to have a competitive advantage over its competitors.
As the project engineer of the construction company, explain the influence of Human Resource Management on the performance of individual and teams(P1.2 )
Human resource management (HRM, or simply HR) is a function in organizations designed to maximize employee performance in service of an employer's strategic objectives. HR is primarily concerned with the management of people within organizations, focusing on policies and systems.HR departments and units in organizations typically undertake a number of activities, including employee recruitment, training and development, performance appraisal, and rewarding (e.g., managing pay and benefit systems). HR is also concerned with industrial relations, that is, the balancing of organizational practices with requirements arising from collective bargaining and from governmental laws.
(7)Human resources are considered the most important asset of an organization, but very few organizations are able to fully harness its potential. The impact of human resource management (HRM) policies and practices on firm performance is an important topic in the fields of human resource management, industrial relations, and industrial and organizational psychology. Lado
and Wilson (1994, p. 701) define a human resource system as a set of distinct but interrelated activities, functions, and processes that are directed at attracting, developing, and maintaining (or disposing of) a firm’s human resources.”
Traditionally, management of this system has gained more attention from service organizations than from manufacturing organizations. However, to enhance operational performance, effectively managing this system is equally important in both types of organizations. Needless to say, sophisticated technologies and innovative manufacturing practices alone can do very little to enhance operational performance unless the requisite human resource management (HRM) practices are in place to form a consistent socio-technical system. For this reason, manufacturing organizations need to carefully evaluate their existing HRM practices and modify them, if needed, so that employees can effectively contribute to operational performance improvement.
In brief a list of top 5 benefit of Human Resource Management are stated below :-
(8)
1. HRM helps in Hiring and Training the Workforce
Manpower planning is one of the most important responsibility of the HR department. HR managers devise hiring strategies for bringing in the right kind of people in their organization. They prepare their Job Descriptions which is best suited for the role in the company. After hiring they also plan for the employee’s induction with a well laid out training and development plans for them.
2. HRM takes care of the Performance Management System
HR is responsible for keeping people feel motivated for their work. First comes the task of defining an individual’s role. Thereby an effective feedback mechanism from time to time helps the employees to improve their skills. This helps in alignment of the organizational objectives with their own personal goals. An effective PMS helps in recognition and rewarding people's performance.
3. HR helps in building culture and values in the organization
Performance of an individual is dependent on the work atmosphere or culture that prevails in an organization. Creating a good conducive working environment is expected from the HR department. A safe and clean work culture helps in bringing the best of an employee and creates a higher job satisfaction.
4. Conflict Management is also an important responsibility of HR
There can be many occasions where there is a disagreement between the employee and the employer. You cannot avoid conflicts from happening. But you can surely try and manage them. Here comes the role of the human resource department in acting as a counsellor and a mediator to sort the issues in an effective manner. The HR takes timely action so that thing does not go out of hands.
5. HR is responsible for developing good relations
Establishing cordial relations lies with the HR to a great extent. They are responsible for holding meetings, seminars and all official gatherings on behalf of the management. Apart from core HR role, if required, the department also lends a helping hand in drafting business and marketing plans for the company.
So we can very well see that a proper HR department helps in building and managing an organization. Hence, companies are laying a greater emphasis on setting up strong and effective Human Resource Department.
Conclusion: To achieve success in the construction business, and to maintain a balance between the quality of work and profit, it is essential to have a responsible and visionary management system. Management system plays key role in any business, and in the modern days it is no different.
LO-2
P2.1. Organizing is the division of the total task necessary to achieve a definite purpose into tasks that can be assigned to individuals. In other words, organizing process leads to the creation of organization structures, which defines how tasks are divided and resources are allocated. Discuss the organization structures or organizational forms given below appropriate for a design and construction organization.
o Functional organizational Structure
o Project Organizational Structure
o Matrix Organizational Structure (P2.1, M2.3)
_______________________________________________________________________________
(9)According to McShane and Von Glinow (2003) , Organizational Structure refers to the division of labor as well as the patterns of coordination, communication, work flow and formal power that direct organizational activities. And Organizational Design refers to the process of creating and modifying organizational structures.
(10)Purpose of Organizational structures help everyone know who does what. To have an efficient and properly functioning business, you need to know that there are people to handle each kind of task. At the same time, you want to make sure that people aren't running up against each other. Creating a structure with clearly defined roles, functions, scopes of authority and systems help make sure your people are working together to accomplish everything the business must do.
Function of Organizational structure is to create a good structure, your business has to take inventory of its functions. You have to identify the tasks to be accomplished. From these, you can map out functions. Usually, you translate these functions into departments.
For example, you have to receive and collect money from clients, pay bills and vendors, and account for your revenues and expenditures. These tasks are all financial and are usually organized into a finance or accounting department. Selling your products, advertising, and participating in industry trade shows are tasks that you can group under the umbrella of a marketing department.
With differing ways to organize the tasks, you can always choose something less traditional. But in all cases, organizational structure brings order to the list of tasks.
(11)An organizational structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. Regardless of construction or any other industry management is a key factor for gaining on the competitors.
Organizations are set up in specific ways to accomplish different goals, and the structure of an organization can help or hinder its progress toward accomplishing these goals. Organizations large and small can achieve higher sales and other profit by properly matching their needs with the structure they use to operate. There are three main types of organizational structure: a) Functional Organizational Structure
b) Project Organizational Structure and
c) Matrix Organizational Structure.
a) Functional Organizational Structure: (12)An organization with a functional structure is divided based on functional areas, such as IT, finance, or marketing.
A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing.
Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.
A disadvantage of this type of structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. A recent trend aimed at combating this disadvantage is the use of teams that cross traditional departmental lines.
An organization can be arranged according to a variety of structures, which determine how the organization will operate and perform. In a functional structure, a common configuration, an organization is divided into smaller groups by areas of specialty (such as IT, finance, operations, and marketing). Some refer to these functional areas as "silos"—entities that are vertical and disconnected from each other. Correspondingly, the company's top management team typically consists of several functional heads (such as the chief financial officer and the chief operating officer). Communication generally occurs within each functional department and is transmitted across departments through the department heads.
Functional structure at FedEx
This organizational chart shows a broad functional structure at FedEx. Different functions are managed from the top down via functional heads (the CFO, the CIO, various VPs, etc.).
Advantages of a Functional Structure
Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. Each group of specialists can therefore operate independently with management acting as the point of cross-communication between functional areas. This arrangement allows for increased specialization.
Disadvantages of a Functional Structure
A disadvantage of this structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. Functional structures may also be susceptible to tunnel vision, with each function perceiving the organization only from within the frame of its own operation. Recent trends that aim to combat these disadvantages include the use of teams that cross traditional departmental lines and the promotion of cross-functional communication.
Conclusion: Functional structures appear in a variety of organizations across many industries. They may be most effective within large corporations that produce relatively homogeneous goods. Smaller companies that require more adaptability and creativity may feel confined by the communicative and creative silos functional structures tend to produce.
Functional structure is set up so that each portion of the organization is grouped according to its purpose. In this type of organization, for example, there may be a marketing department, a sales department and a production department. The functional structure works very well for small businesses in which each department can rely on the talent and knowledge of its workers and support itself. However, one of the drawbacks to a functional structure is that the coordination and communication between departments can be restricted by the organizational boundaries of having the various departments working separately.
(13) b)Project Organizational Structure:
The line, line and staff and functional authority organizational structures facilitate establishment and distribution of authority for vertical coordination and control rather than horizontal relationships. In some projects (complex activity consisting of a number of interdependent and independent activities) work process may flow horizontally, diagonally, upwards and downwards. The direction of work flow depends on the distribution of talents and abilities in the organization and the need to apply them to the problem that exists. The cope up with such situations, project organizations and matrix organizations have emerged.
A project organization is a temporary organization designed to achieve specific results by using teams of specialists from different functional areas in the organization. The project team focuses all its energies, resources and results on the assigned project. Once the project has been completed, the team members from various cross functional departments may go back to their previous positions or may be assigned to a new project. Some of the examples of projects are: research and development projects, product development, construction of a new plant, housing complex, shopping complex, bridge etc.
Feature: Temporary organization designed to achieve specific results by using teams of specialists from different functional areas in the organization.
Importance of Project Organizational Structure:
Project organizational structure is most valuable when:
Work is defined by a specific goal and target date for completion.
Work is unique and unfamiliar to the organization.
Work is complex having independent activities and specialized skills are necessary for accomplishment.
Work is critical in terms of possible gains or losses.
Work is not repetitive in nature.
Characteristics of project organization:
Personnel are assigned to a project from the existing permanent organization and are under the direction and control of the project manager.
The project manager specifies what effort is needed and when work will be performed whereas the concerned department manager executes the work using his resources.
The project manager gets the needed support from production, quality control, engineering etc. for completion of the project.
The authority over the project team members is shared by project manager and the respective functional managers in the permanent organization.
The services of the specialists (project team members) are temporarily loaned to the project manager till the completion of the project.
There may be conflict between the project manager and the departmental manager on the issue of exercising authority over team members.
Since authority relationships are overlapping with possibilities of conflicts, informal relationships between project manager and departmental managers (functional managers) become more important than formal prescription of authority.
Full and free communication is essential among those working on the project.
c) Matrix Organizational Structure:
(14)It is a type of organizational management in which people with similar skills are pooled for work assignments, resulting in more than one manager (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts).
For example, all engineers may be in one engineering department and report to an engineering manager, but these same engineers may be assigned to different projects and report to a different engineering manager or a project manager while working on that project. Therefore, each engineer may have to work under several managers to get his or her job done.
(13)It is a permanent organization designed to achieve specific results by using teams of specialists from different functional areas in the organization. In matrix structures, there are functional managers and product (or project or business group) managers. Functional manager are in charge of specialized resources such as production, quality control, inventories, scheduling and marketing. Product or business group managers are in charge of one or more products and are authorized to prepare product strategies or business group strategies and call on the various functional managers for the necessary resources.
he problem with this structure is the negative effects of dual authority similar to that of project organization. The functional managers may lose some of their authority because product managers are given the budgets to purchase internal resources. In a matrix organization, the product or business group managers and functional managers have somewhat equal power. There is possibility of conflict and frustration but the opportunity for prompt and efficient accomplishment is quite high.
Feature: Superimposes a horizontal set of divisions and reporting relationships onto a hierarchical functional structure
Advantages:
Decentralized decision making.
Strong product/project co-ordination.
Improved environmental monitoring.
Fast response to change.
Flexible use of resources.
Efficient use of support systems.
Disadvantages:
High administration cost.
Potential confusion over authority and responsibility.
High prospects of conflict.
Overemphasis on group decision making.
Excessive focus on internal relations.
This type of organization is often used when the firm has to be highly responsive to a rapidly changing external environment.
P2.2. Organizing is the deployment of organizational resources to achieve organizational strategic goals. The deployment of resources means division of labor into specific departments and jobs, formal lines of authority and mechanism of coordinating diverse organizational tasks. In other words, you may agree that organization structure is a tool that managers use to harness resource for getting things done. Evaluate the following organizational structures and approaches that can be used in the construction and built environment.
Evaluating Organizational Structure Is More Art Than Science
Evaluating organizational structure is more art than science. Computer models that systematically evaluate spans of control and the number of supervisory levels in an organization tend to be of limited usefulness in determining what type of organizational structure is needed because the appropriate organizational arrangements can vary significantly depending on the functions performed in a unit and the skills, experience, and competencies of the people performing those functions. The key question to be asked when evaluating organizational arrangement is not how many people are in management and supervisory positions but what value does each management and supervisory position create. Management and supervisory positions that do not create value commensurate to their costs should be eliminated or restructured. By contrast, management and supervisory positions that create significant value for an organization should be retained even if a computer model would suggest that the positions are not needed.
Using Analytical Tools To Diagnose Organizational Problems
Some aspects of organizational analysis are quite straightforward. For example, activity analysis can be performed to understand how much time middle managers actually spend on management and supervisory activities. In addition, decision/responsibility matrices can be developed to understand who is responsible for making decisions and what positions have overlapping or redundant responsibilities. Likewise, conceptual maps that indicate what functions and services are provided by various organizational units are useful in identifying duplicate services provided by more than one organizational unit and areas where functional or service gaps exist.
Creating Recommendations Tailored To An Organization’s Unique Needs
While analytical tools are useful in diagnosing organizational problems, they are less useful in developing organizational solutions to those problems – that is where the “art” of organizational design comes into play. To be effective, organizational recommendations must be tailored to the unique needs of the organization being evaluated.
Guiding Organizational Principles
Regardless of the unique needs of the organization being evaluated, sound organizational principles should guide the development of organizational structure. The following organizational principles provide the framework that guides Berkshire Advisors’ approach to organizational design:
First and foremost, organizational structure should be designed to facilitate efforts to accomplish the organization’s stated purpose and objectives. Organizational structure should facilitate decision-making, planning, and performance monitoring. Organization structure should focus management attention on priorities Because organizational structure sends a message about what is important to a organization it is often useful to establish an organizational locus for key initiatives With regard to spans of control, the complexity of the functions being performed is the primary determinant of the number of positions that can be effectively supervised As a general rule, responsibility for performing an activity should be assigned at the lowest point in an organization for which there is enough work to constitute an economic unit of production. Management systems should support and be compatible with structure; for example, if a highly decentralized structure is adopted, there should be stringent management controls and an effective early warning system to keep unit managers apprised of potential problems Structure and systems should not be overly complex; both should reflect the management style of key administrators Roles and responsibility of key administrators should be clearly defined, and accountabilities should be clearly established.
Systems, Procedures And Culture Must Be Considered When Designing Organizational Structure
It should also be remembered that organizational structure cannot be evaluated simply by looking at “boxes” on an organizational chart. Systems, procedures, and culture all affect what type of organizational structure should be put in place. For example, before a decentralized administrative structure can be effectively implemented, systems and procedures must be in place to monitor performance and hold managers of decentralized units accountable for achieving desired results. Likewise, spans of control are determined in part by the effectiveness with which expectations are communicated and performance monitored. (When asked what is the appropriate span of control for mid-managers Peter Drucker once replied, “It all depends. A ratio of one to seventy is appropriate for an orchestra leader because all the people supervised have the same score.”) When evaluating organizational structure therefore it is extremely important to consider all the factors that affect organization and to consider what “non-organizational” changes might be implemented both to improve operations and to reduce management and supervisory needs.
P2.3 The scale and size of civil engineering organization determines the type of organization and practices that it embraces to achieve the organizational objectives.
Discuss how the scale and size of construction contracts influence the selection of the right type of organizational arrangement to achieve the project objectives in terms of cost, time and quality. You may have the following organizational arrangements to be considered:
• Functional Organization
• Matrix Organization
• Project Organization
Developing a robust project delivery strategy can significantly affect the success of a large construction or infrastructure project. The appropriate delivery strategy typically drives project cost, quality of design, construction, long-term maintenance, and project completion date. Project owners planning large projects can improve their chances of success by performing a thorough assessment of the key objectives for the project and the delivery strategies available to execute it. The spectrum of project delivery strategies ranges from those where the owners are fully involved to where their involvement is minimal. In practical terms for example, the strategies can vary from those where the owner is an active participant in the initial design phase through commissioning and operations to those where the owner has minimal involvement and relies on a turnkey contractor to coordinate all aspects of the project, including its long-term maintenance and operation. The project owner’s objectives and organizational characteristics dictate the available project delivery strategies. In all cases, the most appropriate delivery strategy will also depend on the specific project and circumstances
Selecting the most appropriate project delivery strategy is only one of the many activities and decision points a project owner will face over the course of a major capital project. It is, however, one of the most important, affecting not only the project outcome but also the owner’s internal management, support structure and the health of its relationship with all other project stakeholders. The project owner’s culture has a significant influence on the appropriate choices for project delivery strategy. The desire to understand and limit its risk by taking the project “one step at a time” might lead the project owner to select a more traditional approach. An active project owner with a “hands-on” approach, who doesn’t mind sharing project risk in a transparent and open manner, is likely to be more comfortable with the collaborative and integrative models of project delivery. If the project owner works in an organization with stable needs that is looking for a solution that transfers project risks both in the short term and in the long term, it may choose the partnership delivery model. Each project delivery method has advantages and disadvantages. This paper will focus on the factors a project owner should consider before selecting a project delivery strategy for a large capital construction or infrastructure project. The paper will explain how those selection factors can influence the timeliness, quality, and cost of a large project and encourage responsible stewardship over the long-term.
The scale and size of civil engineering organization determines the type of organization and practices that it embraces to achieve the organizational objectives. The following organizational arrangements to be considered:
a) Functional Organization: A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing. Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.
In other word Functional organization is suitable for large projects as the works are needed to be divided among expert employees to get the most result. And it’s not suitable for small projects as it would cost much. For example, all engineers may be in one engineering department and report to an engineering manager, but these same engineers may be assigned to different projects and report to a different engineering manager or a project manager while working on that project. Therefore, each engineer may have to work under several managers to get his or her job done.
b) Matrix Organization: It is a type of organizational structure in which people with similar skills are pooled for work assignments, resulting in more than one manager (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts). A lot of the early literature on the matrix comes from the field of cross functional project management where matrices are described as strong, medium or weak depending on the level of power of the project manager.
Some organizations fall somewhere between the fully functional and the pure matrix. These organizations are defined in A Guide to the Project Management Body of Knowledge as composite’. For example, even a fundamentally functional organization may create a special project team to handle a critical project.
However, today, matrix management is much more common and exists at some level, in most large complex organizations, particularly those that have multiple business units and international operations.
c) Project Organization: Organizational project management is the systematic management of projects, programs, and portfolios in alignment with the achievement of strategic goals. The concept of organizational project management is based on the idea that there is a correlation between an organization's capabilities in project management, program management, and portfolio management, and the organization's effectiveness in implementing strategy. As businesses change at a faster rate, it is becoming increasingly important to execute on projects. Additionally, due to the broad nature of much of the change, projects are affecting larger parts of the organization. Therefore, just as the need to perform projects is increasing, the complexity in executing them is also increasing. Organizational project management draws from the broad base of project management and organizational design applications to understand the organizational processes that affect the ability to manage the delivery of projects.(16)
These points are already explained in further details the [Task 2.1]
Conclusion: In short among the mentioned organization structures Functional and Matrix Organizational structure is mostly suitable for large project, It is a very common since that large projects requires more resources to complete the work, and with that it also need well management. And these will not be efficient in the smaller project. By the term not efficient I mean this will be wastes of resources if we use these in the small projects. And lastly the project organization is suitable for medium and smaller projects. And it is effective as well.
3.1. a) Written explanation of the use of planning in the management of construction of 2-storied house
1) Draw a network diagram to illustrate the sequence of events
2) Identify the critical path. Assuming the absence of labor constraints, calculate the minimum time needed to complete the project.
3) A hold up in supplies results in a delay in the commencement of:
i) Activity B by 4 days;
ii) Activity I by 5 days
iii) Activity G by 10 days
In each case state with reasons, whether the delay leads to a failure to complete the project in the minimum time;
Planning is a bridge between the experiences of the past projects and the proposed actions that produces favorable results in the future. It can also be said that it is a precaution by which we can reduce undesirable effects or unexpected happenings and thereby eliminating confusion, waste, and loss of efficiency. Planning involves prior determination, specification of factors, forces, effects and relationships necessary to reach the desired goals.
(15)Construction planning is a fundamental and challenging activity in the management and execution of construction projects. It involves the choice of technology, the definition of work tasks, the estimation of the required resources and durations for individual tasks, and the identification of any interactions among the different work tasks. A good construction plan is the basis for developing the budget and the schedule for work. Developing the construction plan is a critical task in the management of construction, even if the plan is not written or otherwise formally recorded. In addition to these technical aspects of construction planning, it may also be necessary to make organizational decisions about the relationships between project participants and even which organizations to include in a project. For example, the extent to which sub-contractors will be used on a project is often determined during construction planning.
Forming a construction plan is a highly challenging task. As Sherlock Holmes noted:
Most people, if you describe a train of events to them, will tell you what the result would be. They can put those events together in their minds, and argue from them that something will come to pass. There are few people, however, who, if you told them a result, would be able to evolve from their own inner consciousness what the steps were which led up to that result. This power is what I mean when I talk of reasoning backward.
Like a detective, a planner begins with a result (i.e. a facility design) and must synthesize the steps required to yield this result. Essential aspects of construction planning include the generation of required activities, analysis of the implications of these activities, and choice among the various alternative means of performing activities. In contrast to a detective discovering a single train of events, however, construction planners also face the normative problem of choosing the best among numerous alternative plans. Moreover, a detective is faced with an observable result, whereas a planner must imagine the final facility as described in the plans and specifications.
In developing a construction plan, it is common to adopt a primary emphasis on either cost control or on schedule control as illustrated in Fig. 9-1. Some projects are primarily divided into expense categories with associated costs. In these cases, construction planning is cost or expense oriented. Within the categories of expenditure, a distinction is made between costs incurred directly in the performance of an activity and indirectly for the accomplishment of the project. For example, borrowing expenses for project financing and overhead items are commonly treated as indirect costs. For other projects, scheduling of work activities over time is critical and is emphasized in the planning process. In this case, the planner insures that the proper precedence’s among activities are maintained and that efficient scheduling of the available resources prevails. Traditional scheduling procedures emphasize the maintenance of task precedence’s (resulting in critical path scheduling procedures) or efficient use of resources over time (resulting in job shop scheduling procedures). Finally, most complex projects require consideration of both cost and scheduling over time, so that planning, monitoring and record keeping must consider both dimensions. In these cases, the integration of schedule and budget information is a major concern.
Planning should be done logically, thoroughly and honestly to have a chance to succeed. The previous experiences of projects provides basic planning logic. Then difference between previous projects and current projects shall be known to make any exceptional features in the basic planning logic. These differences can be unusual client requirement, out of the way location, potential external or internal delaying factors etc. these potential problems shall have to be tackled in order to reduce their negative effect preparing master plan of the project and later scheduling of the project. Provide each aspect of the plan an individual scrutiny with input from past experiences and from experts.
Types of Planning:
There are several types of project planning. The three major types of construction project planning are:
1. Strategic planning: this involves the high-level selection of the project objectives
2. Operational planning: this involves the detailed planning required to meet the strategic objectives
3. Scheduling: this puts the detailed operational plan on a time scale set by the strategic objectives.
Strategic planning is done by the owner’s corporate planners. In this they decide what project to build and what the completion date has to be to meet the owner’s project goals. The construction teams formulates the master construction execution plan within the guidelines set in the strategic and contracting plans.
Operational Planning:
Operational planning is done by construction teams. They ask certain questions before making operational plan for the project. They are:
• Will the operational plan meet the strategic planning target date?
• Are sufficient construction resources and services available within the company to meet the project objectives?
• What is the impact of the new project on the existing work load?
• Where will we get the resources to handle any overload?
• What company policies may prevent the plan from meeting the target date?
• Are usually long delivery equipment or materials involved?
• Are the project concepts and design firmly established and ready to start the construction?
• Is the original contracting plan still valid?
• Will it be more economical to use a fast-track scheduling approach?
The given data in the question is given below :
Operation Sequence of Activities: the activity is only possible after: Time
(days)
A 5
B A is completed 1
C A is completed 1
D C is completed 2
E Both B and D are completed 20
F E is completed 1
G C is completed 3
H F is completed 6
I A is completed 5
J G,H, and I are completed 6
And by following the data the activity network chart is drawn below.
The mathematical network analysis technique of planning complex working procedures with reference to the critical path of each alternative system is called critical path. According to the diagram the critical paths are “E=F=H=J”
i. Activity B by 4 days: For Activity B we have 2 days. So if it is late by 4 days, then it will surely delay the project completion time by 2 days.
ii. Activity I by 5 days: For Activity I we have 26 days to complete the task, so if we delay by 5 days it would not affect our progress.
iii. Activity G by 10 days: And for the Activity G we have 29 days. So if we start to work even 10 days late it would not affect the final result.
P3.2. Planning, scheduling and the project control are essential and important aspects of project management. Also, you may agree that these aspects are inter-related in a construction project. Considering these components are vital for successful completion of any project:
a) Explain how project procurement, scheduling and control are managed in a project of your organization
(Hint: look at these aspects from the point of client/owner and contractor and the project life cycle)
Planning, scheduling and the project control are essential and important aspects of project management. Also, you may agree that these aspects are inter-related in a construction project. Considering these components are vital for successful completion of any project
(17)Project Planning
The Project Plan is a document explaining the high level details of the proposed project. Key stakeholders of the project are heavily involved in the process of developing the Project Plan. The building of the Project Plan helps the Project Manager solicit information from the team and the vendor concerning the issue at hand and the possible solutions. Feature requirement lists are created, demonstrations are scheduled to find a solution that fits the needs of the team, cost estimates are bundled together, scope and assumptions are defined, risks are noted, and a preliminary timeline is built. This phase may also include a “proof of concept” where test environment(s) are acquired and set up to determine which particular product or package will work best within the confines of our environment. Once a product has been selected to solve the business issue, the Project Plan document can be completed with the scope, cost, and timeline of the project. All relevant stakeholders should have had input into the document and by this point in time, we should be within ±10% concerning Time, Scope and Cost of the implementation of this project. The Project Plan should also include a Communication Plan, resource responsibility matrix Risk Management Plan, HR Plan, and a Change Management Plan.
Once the Project Plan has been signed by the team, the Project Manager, and the IT Director directly affected by the implementation of the project, the Executive Project Summary document can be sent to the appropriate approver(s). The signing of the Executive Project Summary signifies that the project has been approved for procurement and implementation and the Project Charter can then be sent out.
As with any planning document, the Project Plan is a living document and will be updated periodically as the project progresses. The deliverable from the Project Plan is the Project Work Breakdown Structure.
Project Charter
The Project Charter is the document that announces the start of a project and the resources who will be working on the project. The Project Charter is sent to all relevant stakeholders asking for their cooperation in the project.
Procurement
The procurement process begins with the securing of funds during the Business Justification process. Once a project has been approved, the contract from the vendor can be routed through the Contract Routing process
.
• Triple Constraint Triangle
• HR Plan
• Communication Plan
• Change Management Plan
• Risk Management Plan
• Review Gate
Triple Constraint Triangle
The grid below prioritizes the critical project dimensions and is used to negotiate changes during the course of the project. The first step is to specify the constraining dimension. Is the critical project driver scope, cost, quality, or time? The second step is to specify the dimension that could accept change. If change is required, in which area are the key stakeholders most willing to accept change: scope, cost, schedule, or quality? Change must be accepted in at least one dimension. This is specified in the Vary column below. Remaining dimensions are then minimized or maximized. These dimensions will be utilized for all aspects of the project, unless explicitly stated in a sub-project definition.
A balance exists between the four project dimensions and a change in one will impact the other dimensions. For example, if the scope dimension increases then the schedule and cost dimensions will also increase to maintain the quality dimension. If the scope dimension increases, but schedule and cost stay the same then the quality dimension may decrease.
The project dimensions are specified below, with Constrain in at least one dimension and vary in at least one dimension:
Project Dimension Minimize/Maximize Constrain Vary
Scope X
Cost Minimize X
Schedule Minimize X
Quality X
One way to read the dimension grid above would be to say the following:
Delay in implementing the proposed solution will have a negative ripple effect on our ability to meet strategic goals to improve our operational efficiencies as well as customer service goals. There are also primary windows of opportunity for implementation that fall between major processes where in implementation workload is more effectively managed. The goal would be to time implementation so that students will most immediately notice the positive changes. Preferred implementation “go live” goals would be for Fall assignments process or Spring semester opening. We are targeting the Fall Assignments process.
Temporary help or temporary reassignment of current staff may be required to manage work load leading up to implementation milestones.
Scope
Scope Planning-
Creating a project scope management plan that documents how the project scope will be defined, verified, controlled, and how the work breakdown structure (WBS) will be created and defined.
The scope of the project includes the Vision, Mission, Background, major project activities for each phase of the project, planned process improvements, and out of scope activities critical to the success of the project.
Primary objectives (critical success factors) are also included within the scope of the project. The success of the project is measured against the attainment of the project objectives. As such, they must be measurable and have associated project success criteria.
The key benefits to ASU in achieving the objectives is also included within the Scope of the Project.
Planned Process Improvements :
All current and future business processes will be documented and reviewed. The Implementation Team will be focused on outcomes rather than current inputs or existing processes. The goal will be to implement the “Best Practices” contained in the (Software being implemented without modification. ASU Departments will adjust business processes as reasonably required to conform to best practices. Any exceptions will require the approval of the Angelo State University Project Sponsor.
The term “Best Practices” refers to the processes that are built into the software. By selecting the software system, ASU is adopting these “Best Practice” processes to replace their existing processes. Although some changes to the software processes may be required in unique circumstances, failure to limit these changes could impact the overall success of the project.
Assumptions concerning Resources, Priorities, Legacy Systems and Processes, Governance, Access, Training, Data Migration, Testing, Modifications to the system are also identified within the scope planning of the project definition document
Scope Verification-
The project team will be required to sign the PPD before project implementation can begin. This signifies the teams’ formal acceptance of the planned project deliverables.
Scope Control-
Many projects fail to come in on time, with this budget and cost due to scope. Scope is the adding of features and functions without addressing the effects on the time, costs, and resources, or without customer approval, any change to the scope during the implementation that will affect time, cost or scope will be required to be approved through the change management process.
Work Breakdown Structure
A deliverable-oriented hierarchical decomposition of the work to be executed by the project team to accomplish the project objectives and create the required deliverables. It organizes and defines the total scope of the project. Each descending level represents and increasingly detailed definition of the project work. The Work Breakdown Structure is decomposed into work packages. The deliverable orientation of the hierarchy includes both internal and external deliverables.
Cost
Within the PDD, an overall project budget is presented and denotes where funding for both the implementation of the project and ongoing maintenance will be derived from. A contingency fund of 10% of the total project implementation cost is always listed within the budget. The document defines who the Budget will be monitored and managed by, and who billing questions related to the project and invoices will be communicated directly to. (input sample budget here)
The WBS is used to create the Timeline for the project. The processes used to create the timeline are as follows:
Activity Definition - Identifying the specific schedule activities that need to be performed to produce the various project deliverables.
Activity Sequencing - Identifying and documenting dependencies among schedule activities.
Precedence Diagram Method
Based upon the activity sequencing above, one could diagram the activities as such:
Activity Resource Estimating - Estimating the type and quantities of resources required to perform each schedule activity.
Activity Duration Estimating - Estimating the number of work periods that will be needed to complete individual schedule activities.
Using the PERT Estimate, we can get a more precise calculation of estimated activity duration
Critical Path Method
Now that we have duration estimates, we can find the critical path of the project. Meaning, the longest sequence of activities that has to occur for the project to complete on time. These are the activities that must stay on track.
A + C + D + H + I = 80 DAYS
B + C + D + H + I = 69 DAYS
B + C + D + G + H + I = 72 DAYS
E + F + G + H + I = 63 DAYS
The Critical Path is ACDHI. Meaning that these items are dependent upon each other and are in the critical path of this project being completed on time.
Schedule Development- Analyzing activity sequences, durations, resource requirements, and schedule constraints to create the project schedule.
Schedule Control- Controlling changes to the project schedule.
To determine the actual Due Dates for each of these Activities, the Project Manager will request that the project team update the BlackOut Calendar for this project. The Blackout Calendar shows dates that Team members will be unavailable to work on the project. Once this has been done, the PM will enter your project start date and then base each activity due date upon the PERT estimate for that task as well as activity dependencies and the BlackOut Calendar.
Quality
As a project is undertaken to be implemented a standard for the level of quality will need to be set. Quality Assessment visits by consultants or by peers review may be initiated throughout the project to ensure the level of quality of both inputs and outputs are as they should be.
P3.3. Risk management means to take proactive steps to manage and limit risks. Similarly, project risk is related to the planning and delivery of product or services and not being able to meet the three project objectives- quality, time and cost.
Explain how quality control and risk management are managed to achieve the project objectives of your organization. (P3.3, D2.5)
Risk and quality management has been designated as two of the main areas of the Project Management Body of Knowledge (PMBOK) by the Project Management Institute, which is the largest professional organization dedicated to the project management field. The presence of risk creates surprises throughout the project life cycle, affecting everything from technical feasibility to cost, market timing, financial performance, strategic objectives and of course quality. Since all projects are exposed to risk, successful projects are the ones where that risk is properly managed. Systematic application of risk management methodology and its extension to the entire organization can provide a significant competitive advantage in an increasingly uncertain world. Every project has an anticipated level of quality for the project deliverables. The details and specifications set out by the customer determine what the expected level of quality is. But risk event can threaten planned quality. For that reason it’s necessary to manage both quality and risks in projects.
Risk is an uncertain event or condition that, if it occurs, has an effect on at least one project objective. Objectives can include scope, schedule, cost and quality. Outcomes of risky events can be both, positive and negative.
It is impossible to imagine a project without risk. Of course some projects will be high-risk, while others have less risk, but all projects are by definition risky to some extent.
Those involved with launching, sponsoring and managing projects in organizations should welcome risk in their projects, since it enables and supports change, innovation and creativity – as long as it is taken sensibly, intelligently and appropriately, and as long as it is managed effectively. It is also important to remember that not all risk is bad, since the concept includes both threats and opportunities. Within the project context, this means that there are uncertainties that matter because if they occurred they would hinder achievement of project objectives (threats), but there are also uncertainties whose occurrence would help to achieve those objectives (opportunities).
The risk of the project is characterized by three key factors, namely:
Risk event - phenomenon, activity or event that could have a negative impact on the project;
Probability of risk - the likelihood of the risk event;
The size of the stake - the size of the loss, which can occur when the event is achieved.
What projects makes risky?
There are numerous risks which can effect on project. Some of them can be presented in one of following groups:
• common characteristics of projects;
• external environment.
Factors in all projects which make them inherently risky include:
Uniqueness - Every project involves at least some elements that have not been done before, and naturally there is uncertainty associated with these elements;
Complexity - Projects are complex in a variety of ways, and are more than a simple list of activities to be performed. There are various kinds of complexity in projects, including technical, commercial, interfaces or relational, international project each of which brings risk into the project.
Assumptions and constraints-Project scoping involves making a range of guesses about the future, which usually include both assumptions (things we think will or will not happen) and constraints (things we are told to do or not do). Assumptions and constraints may turn out to be wrong, and it is also likely that some will remain hidden or undisclosed, so they are a source of uncertainty in most projects.
People - All projects are performed by people, including project team members and management, clients and customers, suppliers and subcontractors. All of these individuals and groups are unpredictable to some extent, and introduce uncertainty into the projects on which they work.
Stakeholders - These are a particular group of people who impose requirements, expectations and objectives on the project. Stakeholder requirements can be varying, overlapping and sometimes conflicting, leading to risks in project execution and acceptance.
Change - Every project is a change agent, moving from the known present into an unknown future, with all the uncertainty associated with such movement.
Some of environmental factors are:
Market volatility;
Competitor actions;
Emergent requirements;
Client organizational changes;
Internal organizational changes;
Political;
Economic;
Social;
Technological;
legal;
International;
Environmental;
Demographic factors.
How to manage risks in projects?
Although some risks can have positive impact on projects it is necessary to manage risks because mostly of them are harmful and can have negative influence on project.
The objectives of project risk management are to increase the probability and impact of positive events and decrease probability and impact of negative events in the project.
There are numerous approaches for risk management and in this paper will be presented PMBOK methodology Project risk management include following processes:
Plan risk management – this process is very important. In this process project manager should provide necessary resources and time for risk management activities. Result of this process is risk management plan which describes how risk management will be structured and performed on the project;
Identify risks – this process should determine which risks may affect the project and document their characteristics. This is permanent process because risks can appear through its life cycle;
Plan risk responses – each risk event may demand different responses. In this process we should develop options and actions to enhance opportunities and to reduce threats to project objectives;
Perform qualitative risk analysis – there are numerous risks but not all of them have same impact so it’s necessary to prioritize risks. This process allow it by assessing and combining risk probability of occurrence and impact;
Perform quantitative risk analysis – is the process of the numerically analyzing the effect of identified risks on overall project objectives.
Monitor and control risks – include implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness throughout the project. Project should be continuously monitored for new risks.
What are the possible strategies for risk response?
Risk response is the process of developing strategic options, and determining actions, to enhance opportunities and reduce threats to the project’s objectives. A project team member is assigned to take responsibility for each risk response. This process ensures that each risk requiring a response has an owner monitoring the responses, although the owner may delegate implementation of a response to someone else. Risk response strategies are presented in table 1. and it is divided into two groups.
AVOID - Risk can be avoided by removing
the cause of the risk or executing the project
in a different way while still aiming to
achieve project objectives. Not all risks can
be avoided or eliminated, and for others, this
approach may be too expensive or
time‐consuming. However, this should be the
first strategy considered. EXPLOIT - The aim is to ensure that the
opportunity is realized. This strategy seeks to
eliminate the uncertainty associated with a
particular upside risk by making the
opportunity definitely happen. Exploit is an
aggressive response strategy, best reserved
for those “golden opportunities” having high
probability and impacts.
TRANSFER - Transferring risk involves
finding another party who is willing to take
responsibility for its management, and who
will bear the liability of the risk should it
occur. The aim is to ensure that the risk is
owned and managed by the party best able to
deal with it effectively. SHARE - Allocate risk ownership of an
opportunity to another party who is best able
to maximize its probability of occurrence
and increase the potential benefits if it does
occur. Transferring threats and sharing
opportunities are similar in that a third party
is used.
MITIGATE - Risk mitigation reduces the
probability and/or impact of an adverse risk
event to an acceptable threshold. Taking
early action to reduce the probability and/or
impact of a risk is often more effective than
trying to repair the damage after the risk has
occurred. ENHANCE - This response aims to modify
the “size” of the positive risk. The
opportunity is enhanced by increasing its
probability and/or impact, thereby
maximizing benefits realized for the project.
If the probability can be increased to 100
percent, this is effectively an exploit
ACCEPTANCE - This strategy is adopted when it is not possible or practical to respond to the risk by the other strategies, or a response is not warranted by the importance of the risk. When the project manager and the project team decide to accept a risk, they are agreeing to address the risk if and when it occurs. A contingency plan, workaround plan and/or contingency reserve may be developed for that eventuality.
QUALITY
The Project Management Institute defines quality as “the degree to which a set of inherent characteristics fulfill requirements.” The set of inherent characteristics may be a product, processes or system. The requirements may be those of customers or stakeholders, an important group that is ignored at great peril to the success of the project. The essence of the quality concept is that product (goods or services) generated by the project of any organization should fulfill the stated and implied needs of the recipient.
Project quality is the factor that can significantly affect the possibility of risks appearing and the extent of these risks consequences. Project quality management is compatible with ISO 9000 and ISO 10000 quality standards and guidelines.
How to manage quality in projects?
Project quality management includes processes and activities of the performing organization that determine quality policies, objectives and responsibilities so that the project will satisfy for needs for which it was undertaken. It implements the quality management system through policy and procedures with continuous process improvement activities conducted throughout as appropriate. Product quality measures and techniques are specific to the type of product produced by the project.
Project quality management include next processes:
Plan quality – first step in quality management is to identify quality requirements and standards for the project and product. Planning should be parallel with other processes, because quality changes of product can effect on cost and schedule. For that reason it’s necessary to perform risk analysis;
Perform quality assurance – include auditing the quality requirements and the results from quality control measurements to ensure appropriate quality standards and operational definitions are used;
Perform quality control– monitoring and recording results of executing the quality activities to assess performance and recommend necessary changes. Control activities should identify causes of poor process or product quality and recommend and take action to eliminate them. In that way and possible impact of risk events can be decreased.
ISO 10006: 2003 provides guidance on quality management in projects. It outlines quality management principles and practices, the implementation of which are important to, and have an impact on, the achievement of quality objectives in projects.
This standard can apply to projects which can take many forms from the small to very large, from simple to complex, from being an individual project to being part of a program or portfolio of projects.
ISO 10006:2003 is not a guide to "project management" itself. Guidance on quality in project management processes is discussed in this International Standard. Guidance on quality in a project's product-related processes, and on the "process approach", is covered in ISO 9004. A new "Project Management - Guide to project Management" ISO 21500 has been published in September 2012. Since ISO 10006: 2003 is a guidance document, it is not intended to be used for certification/registration purposes.
CONNECTION BETWEEN RISK AND QUALITY IN PROJECTS
It can be said that the integration of risk management methodology and quality contributes to increasing the effectiveness of quality management, by emphasizing on the preventive nature of the decisions regarding strategies and measures for improvement.
Knowing the current state of the risk approach in quality management is important in establishing ways to extend the integration of risk into quality at all levels. In this regard, it should be noted that the risk lies in the quality management systems (QMS), whose philosophy is based on the principle of risk prevention. Thus, effective implementation and operation of the ISO 9001 QMS model provides the opportunity for organizations to consistently make product and process to defined parameters, implicitly, the existence of mechanisms and tools to prevent and reduce risk.
The integrated approach of quality and risk management is facilitated by the fact that ISO 9001 and ISO 31000 standards have elements and common principles, most important being the following:
Quality and risk are associated to management, which involves conducting systematic planning and controlling processes;
Quality management system and risk management system ensure consistency of project activities;
The use of specific and measurable indicators regarding quality and risk, to allow the substantiation of business decisions of improvement and organizational performance.
The most difficult problem in a systematic risk‐quality approach is related of staff skills, given that both quality management and risk management are based on specific concepts and methods and require special training.
Ref: (19),(20),(21),(22),(23),(24),(25),(26),(27)
Conclusion:
Every project is under constant risk threats and uncertainty, also its question until project closing will project quality satisfy customer expectations. From this can be concluded that is necessary to manage risk and quality in projects. If not, planed time, budget and quality can be unreachable.
Quality should be main project objective. Delivering project on time, within budget and without demanded quality does not mean a lot to the customer. Thus, quality is what customer wants and not what project manager makes.
There are different risk response strategies and cause every project is unique its necessary to apply appropriate strategy depend on situation.
Main common characteristic of risk and quality management is that both concepts attempt to reduce the negative impacts of the project activities and outcomes.
LO-4
P4.1 Evaluate the following procurement methods in terms of client and contractor risks:
o Measure and pay (unit rates x quantity)
o Traditional lump-sum contract
o Design build contract
o Private Finance Initiative/Public-Private Partnership Projects (PFI/PPP) (P4.1, D1.1)
Procurement is the acquisition of goods, services or works from an external source. It is favorable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the acquirer in terms of quality and quantity, time, and location.[1] Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.
Almost all purchasing decisions include factors such as delivery and handling, marginal benefit, and price fluctuations. Procurement generally involves making buying decisions under conditions of scarcity. If good data is available, it is good practice to make use of economic analysis methods such as cost-benefit analysis or cost-utility analysis.
An important distinction should be made between analyses without risk and those with risk. Where risk is involved, either in the costs or the benefits, the concept of expected value may be employed.
Direct procurement and indirect procurement
TYPES
Direct procurement Indirect procurement
Raw material and production goods Maintenance, repair, and operating supplies Capital goods and services
F E A T U R E S Quantity Large Low Low
Frequency High Relatively high Low
Value Industry specific Low High
Nature Operational Tactical Strategic
Examples Crude oil in petroleum industry Lubricants, spare parts Crude oil storage facilities
Based on the consumption purposes of the acquired goods and services, procurement activities are often split into two distinct categories. The first category being direct, production-related procurement and the second being indirect, non-production-related procurement.
Direct procurement occurs in manufacturing settings only. It encompasses all items that are part of finished products, such as raw material, components and parts. Direct procurement, which is the focus in supply chain management, directly affects the production process of manufacturing firms. In contrast, Indirect procurement activities concern “operating resources” that a company purchases to enable its operations. It comprises a wide variety of goods and services, from standardized low value items like office supplies and machine lubricants to complex and costly products and services; like heavy equipment and consulting services.
Measure and pay (unit rates x quantity): Unit Price Contracts is a procurement approach commonly used for construction projects. We develop an analytical model to study the optimal procurement quantity and monitoring intensity when the required quantities are uncertain. The optimum involves trading-off risking paying for more units than necessary and conducting costly renegotiations and/or monitoring. The paper adds to the understanding of both optimal behavior in procurements and the presence of cost-overruns. In particular, deliberately procuring low quantities, and thereby facing a high risk of cost-overruns, is sometimes optimal as it minimizes the expected total cost.
(35)Traditional lump-sum contract: A lump sum contract is a great contract agreement to be used if the requested work is well-defined and construction drawings are completed. The lump sum agreement will reduce owner risk, and the contractor has greater control over profit expectations. It is also a preferred choice when stable soil conditions, complete pre-construction studies and assessments are completed and the contractor has analyzed those documents. The stipulated sum contract might contain, when agreed-upon parties, certain unit prices for items with indefinite quantities and allowance to cover any unexpected condition. The time to award this type of contract is also longer; however, it will minimize change orders during construction.
Lump Sum Contract Advantages
A lump sum contract offers the following advantages:
• Low risk to owner.
• 'Fixed' construction cost.
• Minimize change orders.
• Owner supervision is reduced when compared to Time and Material Contract.
• Contractor will try to complete the project faster.
• Accepted widely as a contracting method.
• Bidding analysis and selection process is relatively easily.
• Contractor will maximize its production and performance.
Lump Sum Contract Disadvantages
This type of contracting has also limitations:
• It presents higher risk to contractor.
• Changes are difficult to quantify.
• The Owner might reject change order requests.
• The project needs to be designed completely before the commencement of activities.
• The construction progress could take longer than other contracting alternatives.
• Contractor will select its own means and methods.
• Higher contract prices that could cover unforeseen conditions.
(36)Design build contract: Universally, construction project owners, whether in the public, or private sectors seek timely and cost-effective construction. While there are a variety of views on how best to achieve schedule, budget, and quality, recently there has been a focus upon the method of construction project delivery. There are various construction project delivery systems, the most traditional of which is Design/Bid/Build ("DBB"). For generations, this was the predominately accepted means by which construction projects were developed and delivered. Today there is also a focus on the owner having one primary contractual relationship with an entity that is responsible both for the design and building of the construction project. This project delivery method is called Design/Build.
A. Advantages
1. Time Savings
By combining the selection of a designer and a contractor into one step, the D/B method eliminates time lost in the DBB process. Further, the D/B Contractor is able to start construction before the entire design is completed. For instance, the D/B Contractor can start excavation as soon as the foundation and utility relocation design has been prepared. Meanwhile, the Design professional can continue design work for the rest of the project during excavation.
2. Cost Savings
Potential costs savings can be realized with the D/B system because it has high value engineering capabilities due to the close coordination between the A/E and construction contractor. Construction contractors have direct and real experience with the cost of purchasing and installing materials and, in the D/B system, can share that experience directly with the Design professional during the Design Phase of the project. This process has the potential to translate into lower costs which savings can then be passed on to the Owner.
3. One Point of Contact - "One Stop Shopping"
The one point of contact feature for both design and construction is integral to the D/B system. The advantages of this feature are relative - having only one entity to deal with in many instances will outweigh the oversight benefits an Owner would otherwise get from contracting separately with an Design professional for the project design.
4. Fewer Change Orders
A definite advantage of the D/B system is that an Owner can expect far fewer change orders on a D/B project. However, if an Owner decides it wants a design change during the D/B project, and, that change is not covered by the defined scope of the project, that would be considered an extra. Still, in the D/B system, the Owner is not liable for any errors the Design professional makes because the Design professional is part of the D/B team.
5. Reduced Risk to the Owner
The shifting of liability for design quality from the Owner to the D/B Contractor is one of the most significant features of the D/B project delivery system. The advantage to the Owner is that it now knows from the outset the cost of that risk. As the D/B Contractor is in a better position than the Owner to manage and minimize that risk, this is a significant advantage of D/B contracting.
B. Possible Disadvantages to using the D/B Method
1. Loss of Control of Project Design
In the D/B system, the shift in responsibility for the design from the Owner to the Contractor implicitly includes some shift in control. The Owner should evaluate the degree to which this loss of control will affect the success of the project. If the Owner has specific needs or requirements, it should satisfy itself that it can clearly articulate them in defining the scope of work, or accept the risk that it will have to pay extra to get what it wants via the change order process. Change orders issued to revise scope are not inherently less likely or less expensive in the D/B project delivery method.
2. Less Project Oversight/Control of Quality
As has been discussed, one of the advantages of the D/B concept is the cooperation between the Design professional and the construction contractor because they both are part of the same team: the D/B Contractor. However, this feature can also be a disadvantage, as the architect is no longer the Owner's independent consultant and is now working with and for the contractor. For Owners who do not have their own design-proficient staff, the loss of the architect's input and judgment may expose them to quality control problems. The Owner considering design-build project delivery ignores this issue at its peril. If the Owner is one that is used to having the Design professional act as its agent, it should make plans to have another entity take that responsibility.
3. Suitability of Design-Build Teams
In the DBB methodology, while public agencies are bound by state law to hire the lowest responsive, responsible bidder for construction work, they have more flexibility in selecting designers for their projects. In other words, DBB public owners are allowed to take into account in the selection of a designer more than simply which candidate offered the lowest price. In D/B, the public Owner loses the latitude it had in DBB in selecting a design firm. True, the risk for adequacy of the design has been shifted to the D/B contractor, but that is little solace to an Owner if the finished project is structurally sound but operationally deficient.
III. When Design-Build Should Be Considered
When evaluating whether the D/B methodology would be appropriate for a given project, the following factors should be considered:
A. Schedule
If a project needs to be completed quickly, D/B is an appropriate project delivery system. As discussed previously, in the D/B system, the designer and the contractor are better able to coordinate their efforts to ensure that the work is completed in an expeditious manner. Moreover, another potential time-savings can be found in the administration of the change order process for correction of changes. Shifting the risk to the party best able to control it is one of the advantages of D/B. Controlling the risk of that change/correction process includes the ability to accomplish it more quickly.
B. Budget
Additionally, the D/B system offers several cost saving advantages for the budget conscious Owner. As discussed previously, cost savings can be realized by shifting more cost control responsibility to the Contractor. A construction contractor may have experience with materials and methods that meet the Owner's requirements but were not considered by the designer. If cost savings result from the contractor's input to the design, those savings should be passed on to the Owner. Additionally, value engineering proposals, for which the Owner may get only partial financial credit under DBB delivery, should be included in the D/B bid price and the entire savings passed on to the owner.
However, cost savings is not always cited as a major outcome of the D/B methodology. Public works projects usually do not have the "time is money" motivation to complete. For example, the sooner a school, library or transit system goes into service, the sooner it requires an operational subsidy.
C. Type of Project
The type of project may be the most significant factor in the choice between D/B and DBB. A good candidate for D/B is a project wherein the performance and form of the finished project is readily described in a scope document. On the other hand, a project in which the Owner has many specific and esoteric requirements would be a weaker candidate for this method. Extreme examples of each will help illustrate this point.
A good hypothetical candidate for the D/B system is a municipal sewage treatment plant which has been found to be in violation of EPA requirements for effluent and ordered by the court to treat its effluent to legal levels by a requisite date some months hence. Every day beyond that deadline that the effluent is out of compliance will cost the municipality in fines. What the Owner wants is to build a new facility in time to avoid those fines. It can probably write a single page performance specification that adequately describes what it wants, and just as importantly, when it wants it. A D/B Contractor with experience in the design and construction of similar plants is most likely to meet the needs of the Owner - a plant that removes the offending components from the plant's effluent stream in as short a time as possible.
An example of a project that is not suitable for the D/B system would be a research hospital. For a project like this, the end-user is going to have specific and esoteric needs that would be difficult to outline in a written scoping document. A facility such as this would be best designed by a Design professional, with direct and frequent communication with its client. Even then, one could expect change requests after construction had started.
Public–private partnership : (37)
A public–private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P3.
PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer. In other types (notably the private finance initiative), capital investment is made by the private sector on the basis of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by removing guaranteed annual revenues for a fixed time period.
There are usually two fundamental drivers for PPPs. Firstly, PPPs are claimed to enable the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector. Secondly, a PPP is structured so that the public sector body seeking to make a capital investment does not incur any borrowing. Rather, the PPP borrowing is incurred by the private sector vehicle implementing the project. On PPP projects where the cost of using the service is intended to be borne exclusively by the end user, the PPP is, from the public sector's perspective, an "off-balance sheet" method of financing the delivery of new or refurbished public sector assets. On PPP projects where the public sector intends to compensate the private sector through availability payments once the facility is established or renewed, the financing is, from the public sector's perspective, "on-balance sheet"; however, the public sector will regularly benefit from significantly deferred cash flows.
Typically, a private sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV.The consortium is usually made up of a building contractor, a maintenance company and bank lender(s). It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows make PPP projects prime candidates for project financing. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services while the hospital itself provides medical services.
Private finance initiative : (38)
The private finance initiative (PFI) is a way of creating "public–private partnerships" (PPPs) by funding public infrastructure projects with private capital. Developed initially by the governments of Australia and the United Kingdom, and used extensively there and in Spain, PFI and its variants have now been adopted in many countries as part of the wider program of privatization and financialisation driven by an increased need for accountability and efficiency for public spending.PFI has also been used simply to place a great amount of debt 'off-balance-sheet'.
PFI has been controversial in the UK; the National Audit Office felt in 2003 that it provided good value for money overall.[3] However more recently the Parliamentary Treasury Select Committee found that "PFI should be brought on balance sheet. The Treasury should remove any perverse incentives unrelated to value for money by ensuring that PFI is not used to circumvent departmental budget limits. It should also ask the OBR to include PFI liabilities in future assessments of the fiscal rules".
P4.2 Explain the use of under mentioned contracting methods to manage the construction projects (P4.2, M3.1)
o Traditional- Design-bid-build
o Design & Build
o Lump – sum
Traditional- Design-bid-Build: (28)
Design–bid–build (or design/bid/build, and abbreviated D–B–B or D/B/B accordingly), also known as Design–tender (or "design/tender") traditional method or hardbid, is a project delivery method in which the agency or owner contracts with separate entities for the design and construction of a project.
Design–bid–build is the traditional method for project delivery and differs in several substantial aspects from design–build.
There are three main sequential phases to the design–bid–build delivery method:
a) The design phase
b) The bidding (or tender) phase
c) The construction phase
a) The Design Phase: In this phase the owner retains an architect (or consulting engineer for infrastructure works) to design and produce bid documents, including construction drawings and technical specifications, on which various general contractors will in turn bid to construct the project. For building projects, the architect will work with the owner to identify the owners needs, develop a written program documenting those needs and then produce a conceptual and/or schematic design. This early design is then developed, and the architect will usually bring in other design professionals including mechanical, electrical, and plumbing engineers (MEP engineers), a fire protection engineer, structural engineer, sometimes a civil engineer and often a landscape architect to help complete the construction drawings and technical specifications. The finished bid documents are coordinated by the architect and owner for issuance to general contractors during the bid phase. Design fees are typically between 5-10% of the total project cost.
b) The bidding (or tender) phase: Bidding can be "open", in which any qualified bidder may participate, or "select", in which a limited number of pre-selected contractors are invited to bid.
The various general contractors bidding on the project obtain copies of the bid (or tender) documents, and then put them out to multiple subcontractors for bids on sub-components of the project. Sub-components include items such as the concrete work, structural steel frame, electrical systems, HVAC, and landscaping. Questions may arise during the bid (or tender) period, and the architect will typically issue clarifications or corrections to the bid documents in the form of addenda. From these elements, the contractor compiles a complete bid (or "tender price") for submission by the establish closing date and time (i.e., bid date). Bids can be based on the quantities of materials in the completed construction (e.g., as in the UK with bills of quantities), the operations needed to build it (e.g., as in operational bills), or simply as a lump sum cost; however, these bid requirements are elucidated within the bid documents.
Once bids are received, the architect typically reviews the bids, seeks any clarifications required of the bidders, investigates contractor qualifications, ensures all documentation is in order (including bonding if required), and advises the owner as to the ranking of the bids. If the bids fall in a range acceptable to the owner, the owner and architect discuss the suitability of various bidders and their proposals. The owner is not obligated to accept the lowest bid, and it is customary for other factors including past performance and quality of other work to influence the selection process. However, the project is typically awarded to the general contractor with the lowest bid.
In the event that all of the bids do not satisfy the needs of the owner, whether for financial reasons or otherwise, the owner may choose to reject all bids. The following options become available to the owner:
Re-bid (or re-tender) the construction of the project on a future date when the owner's needs are met, such as when monies become available and/or construction costs go down.
Abandon the project entirely.
Issue a work order to have the architect revise the design (sometimes at no cost to the Owner, if previously negotiated), so as to make the project smaller or more efficient, or reduce features or elements of the project to bring the cost down. The revised bid documents can then be issued again for bid (or re-tendered).
Select a general contractor, such as the lowest bidder, or an experienced cost estimator to assist the architect with design changes aimed at cost reduction. This process is often referred to as value engineering. The revised bid documents can then be issued again for bid (or re-tendered).
Once the construction of the project has been awarded to the contractor, the bid documents (e.g., approved construction drawings and technical specifications) may not be altered. The necessary permits (for example, a building permit) must be achieved from all jurisdictional authorities in order for the construction process to begin. Should design changes be necessary during construction, whether initiated by the contractor, owner, or as discovered by the architect, the architect may issue sketches or written clarifications. The contractor may be required to document "as built" conditions to the owner.
In most instances, nearly every component of a project is supplied and installed by sub-contractors. The general contractor may provide work with its own forces, but it is common for a general contractor to limit its role primarily to managing the construction process and daily activity on a construction site (see also construction management).
During the construction phase the architect also acts as the owner's agent to review the progress of the work as it relates to pay requests from the Contractor, and to issue site instructions, change orders (or field orders), or other documentation necessary to facilitate the construction process and certify that the project is built to the approved construction drawings.
c) The construction phase:
Once the construction of the project has been awarded to the contractor, the bid documents (e.g., approved construction drawings and technical specifications) may not be altered. The necessary permits (for example, a building permit) must be achieved from all jurisdictional authorities in order for the construction process to begin. Should design changes be necessary during construction, whether initiated by the contractor, owner, or as discovered by the architect, the architect may issue sketches or written clarifications. The contractor may be required to document "as built" conditions to the owner.
In most instances, nearly every component of a project is supplied and installed by sub-contractors. The general contractor may provide work with its own forces, but it is common for a general contractor to limit its role primarily to managing the construction process and daily activity on a construction site (see also construction management).
During the construction phase the architect also acts as the owner's agent to review the progress of the work as it relates to pay requests from the Contractor, and to issue site instructions, change orders (or field orders), or other documentation necessary to facilitate the construction process and certify that the project is built to the approved construction drawings.
Potential problems of design–bid–build
• Failure of the design team to be current with construction costs, and any potential cost increases during the design phase could cause project delays if the construction documents must be redone to reduce costs.
• Redesign expense can be disputed should the architect’s contract not specifically address the issue of revisions required to reduce costs.
• Development of a "cheaper is better" mentality amongst the general contractors bidding the project so there is the tendency to seek out the lowest cost sub-contractors in a given market. In strong markets, general contractors will be able to be selective about which projects to bid, but in lean times, the desire for work usually forces the low bidder of each trade to be selected. This usually results in increased risk (for the general contractor) but can also compromise the quality of construction. In the extreme, it can lead to serious disputes involving quality of the final product, or bankruptcy of a sub-contractor who was on the brink of insolvency desperate for work.
• As the general contractor is brought to the team post design, there is little opportunity for input on effective alternates being presented.
• Pressures may be exerted on the design and construction teams due to competing interests (e.g., economy versus acceptable quality), which may lead to disputes between the architect and the general contractor, and associated delays in construction.
Benefits of design–bid–build
• The design team is impartial and looks out for the interests of the owner.
• The design team prepares documents on which all general contractors place bids. With this in mind, the "cheaper is better" argument is rendered invalid since the bids are based on complete documents. Incomplete, incorrect or missed items are usually discovered and addressed during the bid process in the form of addenda.
• Ensures fairness to potential bidders and improves decision making by the owner by providing a range of potential options. It also identifies new potential contractors.
• Assists the owner in establishing reasonable prices for the project.
• Uses competition both in the selection of the architect and the contractor to improve the efficiency and quality for owners.
Design & Build: (29)
Design–build (or design/build, and abbreviated D–B or D/B accordingly) is a project delivery system used in the construction industry. It is a method to deliver a project in which the design and construction services are contracted by a single entity known as the design–builder or design–build contractor. In contrast to "design–bid–build" (or "design–tender"), design–build relies on a single point of responsibility contract and is used to minimize risks for the project owner and to reduce the delivery schedule by overlapping the design phase and construction phase of a project. "DB with its single point responsibility carries the clearest contractual remedies for the clients because the DB contractor will be responsible for all of the work on the project, regardless of the nature of the fault".[1]
The traditional approach for construction projects consists of the appointment of a designer on one side, and the appointment of a contractor on the other side. The design–build procurement route changes the traditional sequence of work. It answers the client's wishes for a single point of responsibility in an attempt to reduce risks and overall costs. It is now commonly used in many countries and forms of contracts are widely available.
Design–build is sometimes compared to the "master builder" approach, one of the oldest forms of construction procedure. Comparing design–build to the traditional method of procurement, the authors of "Design-build Contracting Handbook" noted that: “from a historical perspective the so-called traditional approach is actually a very recent concept, only being in use approximately 150 years. In contrast, the design–build concept—also known as the "master builder" concept—has been reported as being in use for over four millennia."[2]
Although the Design-Build Institute of America (DBIA) takes the position that design–build can be led by a contractor, a designer, a developer or a joint venture, as long as a the design–build entity holds a single contract for both design and construction, some architects have suggested that architect-led design–build is a specific approach to design–build.
Design–build contractor
The "design–builder" is often a general contractor, but in many cases a project is led by a design professional (architect, engineer, architectural technologist or other professional designers). Some design–build firms employ professionals from both the design and construction sector. Where the design–builder is a general contractor, the designers are typically retained directly by the contractor. Partnership or a joint venture between a design firm and a construction firm may be created on a long term basis or for one project only.
Until 1979, the AIA American Institute of Architects' code of ethics and professional conduct prohibited their members from providing construction services. However today many architects in the United States and elsewhere aspire to provide integrated design and construction services, and one approach towards this goal is design–build. The AIA has acknowledged that design–build is becoming one of the main approaches to construction. In 2003, the AIA endorsed "The architect's guide to design–build services", which was written to help their members acting as design–build contractors. This publication gives guidance through the different phases of the process: design services, contracts, management, insurances, and finances.
Design–build institutes
In 1993, the Design-Build Institute of America (DBIA) was formed. Its membership is composed of design and construction industry professionals as well as project owners. DBIA promotes the value of design–build project delivery and teaches the effective integration of design and construction services to ensure success for owners and design and construction practitioners. The Design-Build Institute of America is an organization that defines, teaches and promotes best practices in design–build.
The Canadian Design-Build Institute (CDBI) describes itself as "The recognized voice of Design-Build practitioners in Canada, promoting and enhancing the proper utilization of Design-Build method of procurement and contracting
Debate on the merits of design–build vs. design–bid–build[edit]
The rise of design–build project delivery has threatened the traditional hierarchies and silos of the design and construction industry. As a result, a debate has emerged over the value of design–build as a method of project delivery.
Critics of the design–build approach claim that design–build limits the clients’ involvement in the design and allege that contractors often make design decisions outside their area of expertise. They also suggest that a designer—rather than a construction professional—is a better advocate for the client or project owner and/or that by representing different perspectives and remaining in their separate spheres, designers and builders ultimately create better buildings.
Proponents of design–build counter that design–build saves time and money for the owner, while providing the opportunity to achieve innovation in the delivered facility. They also note that design–build allows owners to avoid being placed directly between the architect/engineer and the contractor. Under design–bid–build, the owner takes on significant risks because of that position. Design–build places the responsibility for design errors and omissions on the design–builder, relieving the owner of major legal and managerial responsibilities. The burden for these costs and associated risks are transferred to the design–build team.
The cost and schedule reduction and decreased litigation associated with design–build project delivery have been demonstrated repeatedly. Researches on Selecting Project Delivery Systems by Victor Sanvido and Mark Konchar of Pennsylvania State University found that design–build projects are delivered 33.5% faster than projects that are designed and built under separate contracts (design-bid-build). Sanvido and Konchar also showed that design–build projects are constructed 12% faster* and have a unit cost that is 6.1% lower than design-bid-build projects. Similar cost and time savings were found in a comparison study of design–build, and design-bid-build for the water/wastewater construction industry, a peer-reviewed paper authored by Smith Culp Consulting that will be published in July 2011 by the American Society of Civil Engineers.[8] A benchmarking and claims study by Victor O. Schinnerer, one of the world's largest firms underwriting professional liability and specialty insurance programs, found that, from 1995–2004, only 1.3% of claims against A/E firms were made by design–build contractors.
Growth of design–build method
A 2011 study analyzing the design–build project delivery method in the United States shows design–build was used on about 40 percent of non-residential construction projects in 2010, a ten percent increase since 2005. The study was commissioned by the Design-Build Institute of America (DBIA) and was completed by RSMeans Reed Construction Data Market Intelligence.
A study from the US Department of Transportation claims that: "Design-build delivery has been steadily increasing in the U.S. public building sector for more than 10 years, but it is still termed experimental in transportation. To date, under Special Experimental Project 14 (SEP-14) the FHWA has approved the use of design–build in more than 150 projects, representing just over half of the States. The European countries visited have used design–build delivery for a longer time than the United States and provided the scan team with many valuable insights. The primary lessons learned on this scan tour relate to the types of projects utilizing design–build, the use of best-value selection, percentage of design in the solicitation, design and construction administration, third-party risks, the use of warranties, and the addition of maintenance and operation to design–build contracts."[10]
Criticisms of design–build
During the design–build procedure, the contractor is deciding on design issues as well as issues related to cost, profits and time exigencies. Whilst the traditional method of construction procurement dissociates the designers from the contractors’ interests, design–build does not. On these grounds it is considered that the design–build procedure is poorly adapted to projects that require complex designs for technical, programmatic or aesthetic purposes. If the designer/architect is 'kept' by the construction company, he probably will never push the envelope as to what might be possible. A notable design–build project that received significant criticism, not only for excessive cost but for environmental issues, was the Belmont Learning Center. The scandal involved alleged contaminated soil that caused significant delays and massive cost overruns. In Los Angeles, District Attorney Steve Cooley, who investigated the Los Angeles Unified School District’s Belmont project, produced a final investigative report, released March 2003.This report concluded that the design–build process caused a number of issues relating to the Belmont scandal:
Design–build does not make use of competitive bidding where prospective builders bid on the same design.
Criteria to select contractor is subjective and difficult to evaluate and to justify later. The design and price selected arouses public suspicion, true or not. This can lead to loss of public confidence.
It concluded the “design–build” approach and “mixed-use concept” together caused controversy, uncertainty, and complexity of the Belmont project which helped increase the potential for project failure.
Lump – sum: (30)
A lump sum contract (or stipulated sum contract) is the traditional means of procuring construction, and still the most common form of construction contract. Under a lump sum contract, a single ‘lump sum’ price for all of the works is agreed before the works begin.
It is generally appropriate where the project is already well defined when tenders are sought and changes are unlikely. This means that the contractor is able to accurately price the risk they are being asked to accept.
Lump sum contracts might be less appropriate where speed is important, or where the nature of the works is not well defined. Other forms of contract that might be more appropriate include measurement contracts (used where the works can be described in reasonable detail, but the amount cannot), cost reimbursement contracts (used where the nature of the works cannot be properly defined at the outset, often used where an immediate start on site is required), target cost contracts and so on (see procurement route for more information).
Lump sum contracts apportion more risk to the contractor that some other forms of contract and give the client some certainty about the likely cost of the works. The tender process will tend to be slower than for other forms of contract and preparing a tender may be more expensive for the contractor.
A lump sum contract does not give all the project risk to the contractor, and it is not a fixed price, or even a guaranteed maximum price. The price of a lump sum contract can change.
Mechanisms for varying the contract sum on a lump sum contract include:
Variations: These are changes in the nature of the works. Most contracts will contain provision for the architect or contract administrator to issue instructions to vary the design, quantities, quality, sequence or working conditions.
Relevant events: A relevant event may be caused by the client (for example failure to supply goods or instructions), or may be a neutral event (such as exceptionally adverse weather) and may result in a claim for loss and expense by the contractor.
Provisional sums: An allowance for a specific element of the works that is not defined in enough detail for tenderers to price.
Fluctuations: A mechanism for dealing with inflation on projects that may last for several years where the contractor tenders based on current prices and then the contract makes provisions for the contractor to be reimbursed for price changes over the duration of the project.
Payments to nominated sub-contractors or nominated suppliers.
Statutory fees.
Payments relating to opening-up and testing the works.
The better defined the works are when the contract is agreed, the less likely it is that the contract sum will change.
A truly 'fixed' price contract would not necessarily be in the interests of the client as it would require that the contractor price risks over which they may have no control, and which might not arise.
P4.3 Evaluate the impact of procurement techniques on construction project performance. (P4.3, D3.3)
Introduction: Project procurement has been described as an organized methods or process and procedure for clients to obtain or acquire construction products. The procurement of construction project is vast in scope because it involves the gathering and organizing of myriads of separate individuals, firms and companies to design manage and build construction products such as houses, office buildings, shopping complex, roads, bridges etc. for specific clients or “customers”. Master man, described project procurement as the organizational structure needed to design and build construction projects for a specific client. It is in a sense very true because the process of “obtaining” a building by a client involves a group of people who are brought together and organized systematically in term of their roles, duties, responsibilities and interrelationship between them. Apart from the traditional approach, there are now other “fast-tracking” or innovative procurement systems used by the construction industry worldwide. The different procurement systems differ from each other in term of allocation of responsibilities, activities sequencing, process and procedure and organizational approach in project delivery. These differences have invariably affected the project performance. Project performance has been defined as “the degree of achievement of certain effort or undertaking”. It relates to the prescribed goals and objectives which form the project parameters. From project management perspective, it is all about meeting or exceeding stake holders’ needs and expectations from a project. It invariably involves placing consideration on three major project elements i.e. time, cost and quality .
Construction Project Performance
Performance has been described as “the degree of achievement of certain effort or undertaking” (31). It relates to the prescribed goals or objectives which form the project parameters(32). From project management perspective, it is all about meeting or exceeding stake holders’ needs and expectations from a project. It invariably involves placing consideration on three major project elements i.e. time, cost and quality(31). Yates and Eskander (33)defined a successful project as a project that has been completed on schedule, within budget, within scope and satisfied the required quality.
Factors Influencing Choice of Procurement System The following criteria were used to examine client requirements and experts preferences for the performance of each procurement method as cited in [34-37] suggest employing the following criteria to establish a profile of the clients requirements: speed (during both design and construction); certainty (price and the stipulated time and knowledge of how much the client has to pay at each period during the construction phase); flexibility in accommodating design changes; quality (contractors reputation, aesthetics and confidence in design); complexity (client may specify particular subcontractor, or buildability analysis); risk allocation/avoidance; responsibility (completion of program, price, product quality, design and construction); price competition (covering such issues as value for money, maintenance costs and competitive tendering); and disputes and arbitration. Similarly, Arazi I., Mahmoud S. and Mohamad H.H. [38] analyzed project performance criteria using severity index method as follows; Construction cost; Construction time; Quality of finish project; Occupational health and safety; Level of technology; Environment friendliness; Contractor’s flexibility; Labor dependency; Quality of coordination by construction team; Contractor’s project management and Contractor’s capacity of manpower.
Project Procurement Systems Procurement systems have become an important issue in the construction industry because of two reasons. Firstly, the procurement of construction projects involves a series of processes that are interrelated and sequential. The effectiveness and efficiency of the processes have considerable impact on the success or failure of projects. Secondly, there are several procurement methods that are available for a developer to adopt in procuring a project. For this reason, one major challenge that the project developer faces is the method to adopt among the available procurement options . Ogunsanmi and Bamisele and Ashworth and Hogg. defined procurement method as the management of the total process involved in construction project delivery. It is also ways in which a client or a sub-client may procure a building or other construction work varied and complex. According to, different variants of procurement are available for meeting different clients' needs and projects specifics. A number of factors have to be taken into account in determining the best method for a specific project. The variants of procurement methods available today metamorphosized from the need to improve construction project delivery, that is, project completion within budget and time.
Danielemphasized that procurement methods is on optimizing all parameters involved in project delivery namely, time, cost and quality. Procurement of projects within these constraints has continued to be a challenge to the design team, the contractors, and managers of investments . Traditionally, construction projects starts with the client's brief on which designs are based. The Architect and engineers prepare designs, in collaboration with quantity surveyor who advises on the cost implications of design variables. Tender process afterwards produces the contractor for the execution of the work. On the award, the successful contractor executes the work as designed under the supervision of the consultants. Thus, the approach separates the design, tendering process and construction as separate tasks. This separation of
International Journal of Sustainable Construction Engineering & Technology (ISSN: 2180-3242)
Vol 4, Issue 1, 2013
Published by:Universiti Tun Hussein Onn Malaysia (UTHM) and Concrete Society of Malaysia (CSM) 52
http://penerbit.uthm.edu.my/ojs/index.php/IJSCET
activities also led to sequencing of activities in which design is completed before construction commences. This became the traditional' sequence and it is now referred to as Design-Bid-Build Other variants of procurement method not following this format became the 'non-conventional' procurement method. Concepts of project delivery have been developed to compress the time required to realize a constructed facility which focuses on simplifying the project delivery process, with emphasis on optimizing the parameters (e.g. quality, cost, time of completion, meeting market needs, and safety among others). In non-conventional procurement methods, the grounds are gradually shifting from just meeting clients' needs into apportionment of risk, as the contractors are gradually taking their stance as business organizations with the aim of making optimum profits at the minimum risk, and this has led to the development of integrated methods of procurement which are hybrids of both traditional and non-conventional procurement methods classified construction procurement methods into two broad categories as: traditional procurement method, and non-conventional procurement method.
Traditional Procurement System According to Seeley and Kadiri and Odusami The main variants of traditional procurement method are: bills of firm quantities; bills of approximate quantities; drawings and specification; schedule of rates; cost reimbursement; and labor only. The traditional method as the name implies, is a project procurement method where the three sequential phases of design, bid and build are identified as separate tasks. It is traditionally referred to as the competitively bid contract. This method allows for all contractors that fill competent to bid for projects in a free and competitive atmosphere similar to competitive market environment. In a typical traditional approach, the client initiates the project and produces a written scope statement, identifying the project’s objectives and verifying the scope definition by the architect. The architect is responsible for defining the project scope in order to facilitate a clear assignment of responsibilities and to monitor the scope change control with the project team. The design team produces complete design documents before engaging the contractor, often affecting the quality by not taking into consideration build- ability, constructability and life-cycle costing. Certain conditions warrant the use of Traditional procurement as opined by Turner, these include when:
A program allows sufficient time;
Consultant design is warranted;
A client wishes to appoint designers and contractors separately;
Price certainty is wanted before the start of construction;
Product quality is required; and
A balance of risk is to be placed between the client and constructor.
Design and Build
This approach gives the client a single point of contact. However, the client commits to the cost of construction, as well as the cost of design, much earlier than with the traditional approach. In this method, the contracting organization is responsible for design and construction. In this system of procurement, all phases of a project, from conception through design and construction are handled by the same organization. This form of procurement has been used for the majority of process-oriented heavy industrial project. Projects using a design-build approach are designed and constructed by a single company or a partnership of companies. Several varieties of Design-Build have evolved including Design-Build-Maintain, Design-Build-Operate-Maintain, and Design-Build-Operate-Maintain-Warrant. Each version of Design-Build provides the government or owner with one source of responsibility for the project. Design-build can be specified in many different ways based on the magnitude of the project.
Management Contracting According to Seeley, Management contracting is a system whereby a main contractor is appointed, either by negotiation or in competition, and works closely with the team of professionals. Also, Oyegoke opined that “in a management contract, the permanent works are constructed under a series of construction contracts placed by the management contractor after approval by the client.” All physical construction is undertaken by sub-contractors selected in competitive bidding. This system usually has the main contractor called the management contractor who provides the management expertise in the construction of the project for a fee. This Manager is appointed at the inception or better still feasibility stage to join the client’s team of consultants, to help work out the design programme and site operations. He manages and co-ordinates the work packages to individual sub-contractors and equally provides on the site service, plant and equipment, amenities etc for the work. The fee paid to the management contractor depends on the nature and extent of the work done and not on the cost of the work. However, management contracting system is most appropriate for large and complex projects which exhibit particular problems that militate against the employment of fixed price contract procedures. Typical examples of which are: Projects for which complicated machinery and / heavy equipment are to be installed concurrently with the building works; Projects for which the design process will of necessity continue throughout most of the construction periods; Projects on which construction problems are such that it is necessary or desirable that the design and management team includes a suitably experienced building contractor appointed on such a basis that his interests are largely synonymous with those of the employer’s professional consultants. Though, there is a wide range of views as to the best procedures to be adapted in management contracting, but they usually incorporates the following activities and requirement: The management contractor is precluded from carrying out any of the physical works using directly employed labour; His role is primarily that of a planner, manager and organizer; The works are divided into packages agreed by the professional team and the management contractor as being most appropriate for the particular projects; The management contractor provides from his own resources the following: Site supervisor, technical and administrative staff to run the contract.
Construction Management Construction management is that group of services over and above the normal Architectural and Engineering services related to the construction programme executed during the pre – design, design and construction phases, that contribute to the control time, cost and quality of new facility. Professional construction management treats the project planning, design, and construction phases as integrated tasks. This approach unites a three –party team consisting of owner, designer, and construction manager in a non-adversary relationship, and it provides the owner with an opportunity to participate fully in the construction process . Construction Management is a fee-based arrangement in which the construction manager is responsible exclusively to the owner and acts in the owner’s interest at every stage of the project. He offers advice on: the optimum use of the available funds, control of the scope of work, project scheduling, avoidance of delays, changes and disputes, enhancing project design and construction qualities, and optimum flexibilities in contracting and procurement [48]. A prime construction contractor or funding agency may also be part of the team. The team works together from the beginning of design to project completion, with the common objective of best serving the owner’s interest.
Construction Management Under a construction management approach, professional expertise in the specialized areas of systems analysis, value engineering, "construct-ability" review, activities scheduling, procurement systems, and construction coordination and supervision is added to the capabilities of the traditional project team of client and architect. The involvement of a Construction Manager during the entire design process as a collaborative yet independent
member of the professional team helps ensure that every major design decision is balanced by proper analysis of its cost consequences, and impact on project schedule [48]. The role of the construction manager on a building project may vary substantially, and can be performed under a variety of contractual terms. The most traditional or purest form of construction management is that where the Construction Manager acts as the client’s agent as a professional consultant, providing estimating, cost control and scheduling services and undertaking administrative responsibilities during construction. Under this arrangement, all construction contracts are executed directly between the owner and contractors. The approach permits the construction work to be broken down into a number of trade contracts thereby eliminating the need for one or more "general" contractors. The elimination of the general contractor avoids a duplication of fees, cost mark-ups and general conditions costs otherwise incurred by the client.
Project Cost and the Effect of Certain Procurement System
Cost has been defined as the degree to which the general conditions promote the completion of a project within the estimated budget . It covers overall costs incurred from project inception to completion. This highlights the importance that has to be attached to every project management activity carried out through every stage of the project development up to completion. also argues that cost is not only confined to the tender sum and that it is the overall cost that a project incurs from inception to completion, which includes any cost arising from variations, modifications during construction period. These cost variables give indication of certain additional practices that when engaged in during the project management process would have both direct and indirect implications for the project cost performance.
The number and manner in which variation orders are issued by consultants during construction is an important practice to look at. Clients who often engage in the habit of agitating for numerous design changes before practical completion also play great role in the influences on project cost. The way contractors respond to variation orders may also have implications for the project performance. In predicting the performance of design-build and design-bid-build projects, identified certain variables that affect cost performance. These include: the number of repetitive elements contained in a project, the extent of design completion when bids are invited, and the level of paid up capital of contractors engaged. These variables bring to bear certain related practices that may affect the performance of project cost. For instance the kind of procurement method usually adopted by clients; traditional procurement or design and build will determine the extent of completion of designs to be used for bidding. Moreover the kind of project consultants selected by clients for design of a particular kind of project will also have influence on the way the design will be made (i. e. whether repetitive elements will be brought into the design or not).
The attitude of client towards the project cost will also determine whether he or she will adhere to the advice given by designers concerning the cost advantage of having repetitive elements in designs. How contractors are usually selected (i. e. always selecting through competitive tendering or negotiated tendering) will also determine the kind of contractors that are employed to execute the projects. The presence of certain features within a particular contract also goes a long way to determine the kind of contractors that would tender for the job and eventually win. For instance the availability of certain facilities (such as payment of advance mobilization by client) within a given building contract may attract contractors who have low level of paid up capital or low level of ability to pre-finance a project. The level of financial capability of the winning contractor would have bearing on project performance.
Project Quality and the Effect of Certain Procurement System
Construction quality is defined as “the totality of the features required to satisfy a given need; fitness for purpose. The extent to which projects are monitored, the experience of project consultants, quality and past performance record of contractors and the number of variation orders issued all have effect on quality. How all these factors can be competently coordinated would be relevant to achieving satisfactory quality performance. The project management team leader has the responsibility to ensure that these factors combine well to yield good quality performance.
Quality performance has been considered as a function of the procedures adopted during the construction process . Those procedures comprise the concept of procurement form and the method of tendering. The fragmented nature of the construction industry and the fact that every building project is unique places great responsibility on the project management team in setting up the building process that will bring the project to a successful conclusion. The emphasis here is on process and procedures having influence on quality of a building project. The subsequent issue that arises is how often project managers, having a sense of the uniqueness of every project, tailor certain procurement practices to correspond with the uniqueness of a project in order to yield good quality performance. Some of the procedures to be given recognition may therefore include the selection procedure of organizations required to perform the design and supervision and those responsible for the construction of the particular project too. Usually, the construction team would be appointed under competition through competitive tendering process. Sometimes, a contractor may be appointed by negotiation on the basis of a fee. In cases where the design and construction is done as a complete package, both may be let by competition.
The selection procedures applied to contractors are therefore by no means always the same. Different methods have different levels of impact on project success. For instance it was noted from previous research that “competitive tendering can adversely affect the outcome of major projects and the number of separate contracts is related to the chances of success; different selection methods will pose different levels of risk to the project team members” . The selection procedures adopted by clients for project consultants should also not be overlooked since less attention has been given to this aspect of project management by several research works.
Quality is considered as a very crucial issue in project development. opined that the importance of quality performance and safety at times surpass cost and time of delivery in civil engineering projects although, these factors are interrelated and interdependent. maintained that the issue of quality performance of construction projects in Nigeria has resulted in colossal waste of human and material resources and in most of the cases, the indigenous contractors are found culpable. The degree to which a project’s quality objective is attained which is subjectively measured on a ranking scale. In view of the numerous parties and factors whose requirements should be met, the several activities, actions, processes and techniques involved in meeting these requirements and the many individuals and bodies concerned with planning and implementing them, maintained that quality management is far more difficult to achieve in construction than in other industries.
Conclusions
a. That despite its problems and shortcomings which includes long and bureaucratic processes, lots of variation and change orders and the resultant disputes, the traditional system of procurement still remain most popular, prevalent and frequently used system.
b. That none of the selected procurement systems could be called ‘the best’ but one can be better than the other the other in term of specific performance.
c. Finally that among the selected procurement systems which are Construction management, Design and Build, Management contracting and Traditional system, the Design and Build is most cost effective as it gives no room to claims, extra and external managerial cost in form of consultancies on the part of both the client and contractor, legal cost is minimal because the procurement is single source. Also from the findings on quality, if quality slippage must be curtail the Construction Management system is the most appropriate as it ranked highest from the field survey.
Ref: (35)
References Links :-
(1) http://en.wikiversity.org/wiki/Principles_of_Management
(2) http://en.wikipedia.org/wiki/Henri_Fayol
(3) http://study.com/academy/lesson/what-is-motivation-in-management-definition-process-types.html
(4) http://www.managementstudyguide.com/coordination.htm
(5) From Handouts. 1/7/2015
(6) http://smallbusiness.chron.com/examples-forecasting-techniques-67387.html
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(9) From Handout “Organizational Design and Structure”
(10) http://smallbusiness.chron.com/purpose-organizational-structure-3812.html
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(14) http://en.wikipedia.org/wiki/Matrix_management
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(18) Project Management Institute, A guide to the project management body of knowledge, Fourth edition, 2008.
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(25) ISO, ISO 10006:2003 Quality Management Systems – Guidelines for Quality Management in Projects, 2003
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(28) http://en.wikipedia.org/wiki/Design%E2%80%93bid%E2%80%93build
(29) http://en.wikipedia.org/wiki/Design%E2%80%93build
(30) http://www.designingbuildings.co.uk/wiki/Lump_sum_contract
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(34) https://www.academia.edu/4716096/EFFECT_OF_SELECTED_PROCUREMENT_SYSTEMS_ON_BUILDING_PROJECT_PERFORMANCE_IN_NIGERIA
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(37) http://en.wikipedia.org/wiki/Public%E2%80%93private_partnership
P1.1 : Explain the principles of management (that have evolved throughout the history of organization since the industrial revolution) used in the construction and built environment sector and especially to your construction organization. (P1.1 M1.3)
Management is a process of designing and maintaining an environment in which individuals work together in groups to effectively and efficiently accomplish selected aims. In other word we can say Management is a set of activities directed at an organizations resources with the aim of achieving organizational goals in an efficient and effective manner.
Management is consist of Forecasting, Planning, Organizing, Staffing or Directing, Motivation, coordinating and Controlling. (5)
Forecasting: Forecasting is a decision-making tool used by many businesses to help in budgeting, planning, and estimating future growth. In the simplest terms, forecasting is the attempt to predict future outcomes based on past events and management insight.
(6)Demand forecasting might be simple in stable environments where the future very closely resembles the past. Most small business owners learn early on, however, that the future rarely replicates the past. As a result, demand forecasting -- the ability to predict future sales -- is a critical skill. Equally important is the selection of a forecasting technique, such as structured analogies or judgmental decomposition, that will help you identify the rate of change from your market's current level of demand to its future demand level.
Structured Analogies : A small business might find the past useful in predicting the future, if the past marketing scenario is similar to a future situation. In this case, a business might rely on an expert skilled in the use of structured analogies to forecast demand. For example, the expert might estimate the probable demand for a product the company will introduce in one regional market based on his review of historical data regarding the introduction of similar products in other regional markets. Assuming the expert has experience with analogous situations, he will be able to gauge the similarities between the proposed and prior product introductions. Based on these similarities or differences, the expert will consider to what degree the probable outcome of the new product introduction will mirror the outcomes of previous product introductions. The expert will then create a demand forecast as determined by the most similar analogies
Judgmental Decomposition: To apply the judgmental decomposition demand forecasting technique, a small business owner reconstructs a marketing scenario and addresses each element of the scenario separately. The leader then combines the individual forecasts to yield the demand forecast for a particular product or service. For example, to forecast the sales revenues for a brand, the leader will forecast the sales volume for the industry, estimate the company’s market share and the per-unit sales price. The leader will then multiply the company’s market share by the per-unit sales price to determine the forecasted sales revenues for the brand.
Expectations Survey :Using an expectations survey, the existing and potential customers of a small business are asked to state how they might behave in a particular situation. The expectations of those individuals surveyed reflect their beliefs about some future event that may and may not happen. For example, a customer might be asked whether she expects to attend a wedding in the next six months. In this instance, the customer might consider the fact that she has several friends, relatives or coworkers who are engaged, so her expectation might be that it's highly probable the event will occur. She might then respond to the survey by selecting the response “10” that indicates the customer expects to attend a wedding in the next six months.
Market Segmentation: Segmentation allows a small business owner to divide a problem into separate parts and develop forecasts for each part using a preferred forecasting technique. The individual forecasts are then combined to create a complete demand forecast. For example, a small jewelry store chain might create a forecast for the sale of a luxury watches for each location, and then add all the forecasts together to create a forecast for all locations. Other segments might also be used, such as geographic or climatic regions and regions divided by demographics, including age or employment status.
Planning: A basic management function involving formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources. The planning process
Identifies the goals or objectives to be achieved,
Formulates strategies to achieve them,
Arranges or creates the means required, and
Implements, directs, and monitors all steps in their proper sequence.
In short if we can say it as, The process of making plans for something.
Organizing: This refers to the structures which results from identifying and grouping the works, defying and delegating the responsibility and authority and establishing relationships.
When organizing a business it should be provided with things that are necessary for functioning. For examples :- a) Personnel (Workers)
b) Raw Materials
c) Machineries.
d) Capitals.
Staffing: The selection and training of individuals for specific job functions, and charging them with the associated responsibilities.
Motivation : Often, people confuse the idea of 'happy' employees with 'motivated' employees. These may be related, but motivation actually describes the level of desire employees feel to perform, regardless of the level of happiness. Employees who are adequately motivated to perform will be more productive, more engaged and feel more invested in their work. When employees feel these things, it helps them, and thereby their managers, be more successful.
It is a manager's job to motivate employees to do their jobs well. So how do managers do this? The answer is motivation in management, the process through which managers encourage employees to be productive and effective. (3)
Coordination : Coordination is a process to establish harmony among the different activities of an organization, so that the desired objectives can be achieved. Definitions of coordination present the following facts about its characteristics:
Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing, directing and controlling. That is why, co-ordination is not a separate function of management because achieving of harmony between individuals efforts towards achievement of group goals is a key to success of management. Co-ordination is the essence of management and is implicit and inherent in all functions of management.(4)
Controlling: Control, or controlling, is one of the managerial functions like planning, organizing, staffing and directing. It is an important function because it helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in a desired manner.
According to modern concepts, control is a foreseeing action whereas earlier concept of control was used only when errors were detected. Control in management means setting standards, measuring actual performance and taking corrective action.
Changes in the global economy have reshaped the modern-day workforce, causing organizations and companies to reassess how they manage and motivate their employees. Effectively managing a workforce hinges on understanding how each employee operates and performs, and on providing an environment in which all employees can thrive and succeed for the betterment of the company.
Henri Fayol (Istanbul, 29 July 1841 – Paris, 19 November 1925) was a French mining engineer and director of mines who developed a general theory of business administration that is often called Fatalism. He and his colleagues developed this theory independently of scientific management but roughly contemporaneously. Like his contemporary, Frederick Winslow Taylor, he is widely acknowledged as a founder of modern management methods. (2)
Management principles are guidelines for the decisions and actions of managers. They were derived through observation and analysis of events faced in actual practice.
The Principles of Management are the essential, underlying factors that form the foundations of successful management. According to [Henri Fayol].
Division of Work (1)
The specialization of the workforce according to the skills of a person , creating specific personal and professional development within the labor force and therefore increasing productivity; leads to specialization which increases the efficiency of labor. By separating a small part of work, the workers speed and accuracy in its performance increases. This principle is applicable to both technical as well as managerial work,. this can be made useful in case of project works too. Planning is to decide what to do before *
Authority and Responsibility
The issue of commands followed by responsibility for their consequences. Authority means the right of a superior to give enhance order to his subordinates; responsibility means obligation for performance. This principle suggests that there must be parity between authority and responsibility. They are co-existent and go together, and are two sides of the same coin. and the authority must be commensurate with responsibility
Discipline
Discipline refers to obedience, proper conduct in relation to others, respect of authority, etc. It is essential for the smooth functioning of all organizations. This will also help shape the culture inside the organization.
Unity of Command
This principle states that every subordinate should receive orders and be accountable to one and only one superior. If an employee receives orders from more than one superior, it is likely to create confusion and conflict. Unity of Command also makes it easier to fix responsibility for mistaken the authority should be commensurate with responsibility
Unity of Direction
All those working in the same line of activity must understand and pursue the same objectives. All related activities should be put under one group, there should be one plan of action for them, and they should be under the control of one manager.
It seeks to ensure unity of action, focusing of efforts and coordination of strength.
Subordination of Individual Interest
The management must put aside personal considerations and put company objectives first. Therefore the interests of goals of the organization must prevail over the personal interests of individuals.
Remuneration
Workers must be paid sufficiently as this is a chief motivation of employees and therefore greatly influences productivity. The quantum and methods of remuneration payable should be fair, reasonable and rewarding of effort. Remuneration is paid to worker as per their capacity and productivity. The main objective of an organization is to maximize the wealth and the net profit as well. For this purpose, the organization has paid wages, salary, and benefit to their staff properly and scientifically so that organizational efficiency can be ensured.
The Degree of Centralization
The amount of power wielded with the central management depends on company size. Centralization implies the concentration of decision making authority at the top management. Sharing of authority with lower levels is called decentralization. The organization should strive to achieve a proper balance.
Scalar Chain
Scalar Chain refers to the chain of superiors ranging from top management to the lowest rank. The principle suggests that there should be a clear line of authority from top to bottom linking all managers at all levels. It is considered a chain of command. It involves a concept called a "gang plank" using which a subordinate may contact a superior or his superior in case of an emergency, defying the hierarchy of control. However the immediate superiors must be informed about the matter
Order
Social order ensures the fluid operation of a company through authoritative procedure. Material order ensures safety and efficiency in the workplace. Order should be acceptable and under the rules of the company
Equity
Employees must be treated kindly, and justice must be enacted to ensure a just workplace. Managers should be fair and impartial when dealing with employees, giving equal attention towards all employees.
Stability of Tenure of Personnel
The period of service should not be too short and employees should not be moved from positions frequently. An employee cannot render useful service if he is removed before he becomes accustomed to the work assigned to him.
Initiative
Using the initiative of employees can add strength and new ideas to an organization. Initiative on the part of employees is a source of strength for organization because it provides new and better ideas. Employees are likely to take greater interest in the functioning of the organization.
Esprit de Corps
This refers to the need of managers to ensure and develop morale in the workplace; individually and communally. Team spirit helps develop an atmosphere of mutual trust and understanding.
Conclusion : For achieving success management has to be strong and well organized. But following the management principals one could use it as a guideline for start and improve significantly. Depending on the situation and analyzing the different factor
P1.2 : Management is a process of Planning, Organizing, Leading and Controlling an organization’s key resources such as human, financial, and material resources in order to achieve organizational goals in an efficient and effective manner. In modern day organizations and thinking believe that the human resources perspective or the Human Resources Management (HRM) is an important function of the overall organization (such as a construction business) to have a competitive advantage over its competitors.
As the project engineer of the construction company, explain the influence of Human Resource Management on the performance of individual and teams(P1.2 )
Human resource management (HRM, or simply HR) is a function in organizations designed to maximize employee performance in service of an employer's strategic objectives. HR is primarily concerned with the management of people within organizations, focusing on policies and systems.HR departments and units in organizations typically undertake a number of activities, including employee recruitment, training and development, performance appraisal, and rewarding (e.g., managing pay and benefit systems). HR is also concerned with industrial relations, that is, the balancing of organizational practices with requirements arising from collective bargaining and from governmental laws.
(7)Human resources are considered the most important asset of an organization, but very few organizations are able to fully harness its potential. The impact of human resource management (HRM) policies and practices on firm performance is an important topic in the fields of human resource management, industrial relations, and industrial and organizational psychology. Lado
and Wilson (1994, p. 701) define a human resource system as a set of distinct but interrelated activities, functions, and processes that are directed at attracting, developing, and maintaining (or disposing of) a firm’s human resources.”
Traditionally, management of this system has gained more attention from service organizations than from manufacturing organizations. However, to enhance operational performance, effectively managing this system is equally important in both types of organizations. Needless to say, sophisticated technologies and innovative manufacturing practices alone can do very little to enhance operational performance unless the requisite human resource management (HRM) practices are in place to form a consistent socio-technical system. For this reason, manufacturing organizations need to carefully evaluate their existing HRM practices and modify them, if needed, so that employees can effectively contribute to operational performance improvement.
In brief a list of top 5 benefit of Human Resource Management are stated below :-
(8)
1. HRM helps in Hiring and Training the Workforce
Manpower planning is one of the most important responsibility of the HR department. HR managers devise hiring strategies for bringing in the right kind of people in their organization. They prepare their Job Descriptions which is best suited for the role in the company. After hiring they also plan for the employee’s induction with a well laid out training and development plans for them.
2. HRM takes care of the Performance Management System
HR is responsible for keeping people feel motivated for their work. First comes the task of defining an individual’s role. Thereby an effective feedback mechanism from time to time helps the employees to improve their skills. This helps in alignment of the organizational objectives with their own personal goals. An effective PMS helps in recognition and rewarding people's performance.
3. HR helps in building culture and values in the organization
Performance of an individual is dependent on the work atmosphere or culture that prevails in an organization. Creating a good conducive working environment is expected from the HR department. A safe and clean work culture helps in bringing the best of an employee and creates a higher job satisfaction.
4. Conflict Management is also an important responsibility of HR
There can be many occasions where there is a disagreement between the employee and the employer. You cannot avoid conflicts from happening. But you can surely try and manage them. Here comes the role of the human resource department in acting as a counsellor and a mediator to sort the issues in an effective manner. The HR takes timely action so that thing does not go out of hands.
5. HR is responsible for developing good relations
Establishing cordial relations lies with the HR to a great extent. They are responsible for holding meetings, seminars and all official gatherings on behalf of the management. Apart from core HR role, if required, the department also lends a helping hand in drafting business and marketing plans for the company.
So we can very well see that a proper HR department helps in building and managing an organization. Hence, companies are laying a greater emphasis on setting up strong and effective Human Resource Department.
Conclusion: To achieve success in the construction business, and to maintain a balance between the quality of work and profit, it is essential to have a responsible and visionary management system. Management system plays key role in any business, and in the modern days it is no different.
LO-2
P2.1. Organizing is the division of the total task necessary to achieve a definite purpose into tasks that can be assigned to individuals. In other words, organizing process leads to the creation of organization structures, which defines how tasks are divided and resources are allocated. Discuss the organization structures or organizational forms given below appropriate for a design and construction organization.
o Functional organizational Structure
o Project Organizational Structure
o Matrix Organizational Structure (P2.1, M2.3)
_______________________________________________________________________________
(9)According to McShane and Von Glinow (2003) , Organizational Structure refers to the division of labor as well as the patterns of coordination, communication, work flow and formal power that direct organizational activities. And Organizational Design refers to the process of creating and modifying organizational structures.
(10)Purpose of Organizational structures help everyone know who does what. To have an efficient and properly functioning business, you need to know that there are people to handle each kind of task. At the same time, you want to make sure that people aren't running up against each other. Creating a structure with clearly defined roles, functions, scopes of authority and systems help make sure your people are working together to accomplish everything the business must do.
Function of Organizational structure is to create a good structure, your business has to take inventory of its functions. You have to identify the tasks to be accomplished. From these, you can map out functions. Usually, you translate these functions into departments.
For example, you have to receive and collect money from clients, pay bills and vendors, and account for your revenues and expenditures. These tasks are all financial and are usually organized into a finance or accounting department. Selling your products, advertising, and participating in industry trade shows are tasks that you can group under the umbrella of a marketing department.
With differing ways to organize the tasks, you can always choose something less traditional. But in all cases, organizational structure brings order to the list of tasks.
(11)An organizational structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. Regardless of construction or any other industry management is a key factor for gaining on the competitors.
Organizations are set up in specific ways to accomplish different goals, and the structure of an organization can help or hinder its progress toward accomplishing these goals. Organizations large and small can achieve higher sales and other profit by properly matching their needs with the structure they use to operate. There are three main types of organizational structure: a) Functional Organizational Structure
b) Project Organizational Structure and
c) Matrix Organizational Structure.
a) Functional Organizational Structure: (12)An organization with a functional structure is divided based on functional areas, such as IT, finance, or marketing.
A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing.
Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.
A disadvantage of this type of structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. A recent trend aimed at combating this disadvantage is the use of teams that cross traditional departmental lines.
An organization can be arranged according to a variety of structures, which determine how the organization will operate and perform. In a functional structure, a common configuration, an organization is divided into smaller groups by areas of specialty (such as IT, finance, operations, and marketing). Some refer to these functional areas as "silos"—entities that are vertical and disconnected from each other. Correspondingly, the company's top management team typically consists of several functional heads (such as the chief financial officer and the chief operating officer). Communication generally occurs within each functional department and is transmitted across departments through the department heads.
Functional structure at FedEx
This organizational chart shows a broad functional structure at FedEx. Different functions are managed from the top down via functional heads (the CFO, the CIO, various VPs, etc.).
Advantages of a Functional Structure
Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. Each group of specialists can therefore operate independently with management acting as the point of cross-communication between functional areas. This arrangement allows for increased specialization.
Disadvantages of a Functional Structure
A disadvantage of this structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. Functional structures may also be susceptible to tunnel vision, with each function perceiving the organization only from within the frame of its own operation. Recent trends that aim to combat these disadvantages include the use of teams that cross traditional departmental lines and the promotion of cross-functional communication.
Conclusion: Functional structures appear in a variety of organizations across many industries. They may be most effective within large corporations that produce relatively homogeneous goods. Smaller companies that require more adaptability and creativity may feel confined by the communicative and creative silos functional structures tend to produce.
Functional structure is set up so that each portion of the organization is grouped according to its purpose. In this type of organization, for example, there may be a marketing department, a sales department and a production department. The functional structure works very well for small businesses in which each department can rely on the talent and knowledge of its workers and support itself. However, one of the drawbacks to a functional structure is that the coordination and communication between departments can be restricted by the organizational boundaries of having the various departments working separately.
(13) b)Project Organizational Structure:
The line, line and staff and functional authority organizational structures facilitate establishment and distribution of authority for vertical coordination and control rather than horizontal relationships. In some projects (complex activity consisting of a number of interdependent and independent activities) work process may flow horizontally, diagonally, upwards and downwards. The direction of work flow depends on the distribution of talents and abilities in the organization and the need to apply them to the problem that exists. The cope up with such situations, project organizations and matrix organizations have emerged.
A project organization is a temporary organization designed to achieve specific results by using teams of specialists from different functional areas in the organization. The project team focuses all its energies, resources and results on the assigned project. Once the project has been completed, the team members from various cross functional departments may go back to their previous positions or may be assigned to a new project. Some of the examples of projects are: research and development projects, product development, construction of a new plant, housing complex, shopping complex, bridge etc.
Feature: Temporary organization designed to achieve specific results by using teams of specialists from different functional areas in the organization.
Importance of Project Organizational Structure:
Project organizational structure is most valuable when:
Work is defined by a specific goal and target date for completion.
Work is unique and unfamiliar to the organization.
Work is complex having independent activities and specialized skills are necessary for accomplishment.
Work is critical in terms of possible gains or losses.
Work is not repetitive in nature.
Characteristics of project organization:
Personnel are assigned to a project from the existing permanent organization and are under the direction and control of the project manager.
The project manager specifies what effort is needed and when work will be performed whereas the concerned department manager executes the work using his resources.
The project manager gets the needed support from production, quality control, engineering etc. for completion of the project.
The authority over the project team members is shared by project manager and the respective functional managers in the permanent organization.
The services of the specialists (project team members) are temporarily loaned to the project manager till the completion of the project.
There may be conflict between the project manager and the departmental manager on the issue of exercising authority over team members.
Since authority relationships are overlapping with possibilities of conflicts, informal relationships between project manager and departmental managers (functional managers) become more important than formal prescription of authority.
Full and free communication is essential among those working on the project.
c) Matrix Organizational Structure:
(14)It is a type of organizational management in which people with similar skills are pooled for work assignments, resulting in more than one manager (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts).
For example, all engineers may be in one engineering department and report to an engineering manager, but these same engineers may be assigned to different projects and report to a different engineering manager or a project manager while working on that project. Therefore, each engineer may have to work under several managers to get his or her job done.
(13)It is a permanent organization designed to achieve specific results by using teams of specialists from different functional areas in the organization. In matrix structures, there are functional managers and product (or project or business group) managers. Functional manager are in charge of specialized resources such as production, quality control, inventories, scheduling and marketing. Product or business group managers are in charge of one or more products and are authorized to prepare product strategies or business group strategies and call on the various functional managers for the necessary resources.
he problem with this structure is the negative effects of dual authority similar to that of project organization. The functional managers may lose some of their authority because product managers are given the budgets to purchase internal resources. In a matrix organization, the product or business group managers and functional managers have somewhat equal power. There is possibility of conflict and frustration but the opportunity for prompt and efficient accomplishment is quite high.
Feature: Superimposes a horizontal set of divisions and reporting relationships onto a hierarchical functional structure
Advantages:
Decentralized decision making.
Strong product/project co-ordination.
Improved environmental monitoring.
Fast response to change.
Flexible use of resources.
Efficient use of support systems.
Disadvantages:
High administration cost.
Potential confusion over authority and responsibility.
High prospects of conflict.
Overemphasis on group decision making.
Excessive focus on internal relations.
This type of organization is often used when the firm has to be highly responsive to a rapidly changing external environment.
P2.2. Organizing is the deployment of organizational resources to achieve organizational strategic goals. The deployment of resources means division of labor into specific departments and jobs, formal lines of authority and mechanism of coordinating diverse organizational tasks. In other words, you may agree that organization structure is a tool that managers use to harness resource for getting things done. Evaluate the following organizational structures and approaches that can be used in the construction and built environment.
Evaluating Organizational Structure Is More Art Than Science
Evaluating organizational structure is more art than science. Computer models that systematically evaluate spans of control and the number of supervisory levels in an organization tend to be of limited usefulness in determining what type of organizational structure is needed because the appropriate organizational arrangements can vary significantly depending on the functions performed in a unit and the skills, experience, and competencies of the people performing those functions. The key question to be asked when evaluating organizational arrangement is not how many people are in management and supervisory positions but what value does each management and supervisory position create. Management and supervisory positions that do not create value commensurate to their costs should be eliminated or restructured. By contrast, management and supervisory positions that create significant value for an organization should be retained even if a computer model would suggest that the positions are not needed.
Using Analytical Tools To Diagnose Organizational Problems
Some aspects of organizational analysis are quite straightforward. For example, activity analysis can be performed to understand how much time middle managers actually spend on management and supervisory activities. In addition, decision/responsibility matrices can be developed to understand who is responsible for making decisions and what positions have overlapping or redundant responsibilities. Likewise, conceptual maps that indicate what functions and services are provided by various organizational units are useful in identifying duplicate services provided by more than one organizational unit and areas where functional or service gaps exist.
Creating Recommendations Tailored To An Organization’s Unique Needs
While analytical tools are useful in diagnosing organizational problems, they are less useful in developing organizational solutions to those problems – that is where the “art” of organizational design comes into play. To be effective, organizational recommendations must be tailored to the unique needs of the organization being evaluated.
Guiding Organizational Principles
Regardless of the unique needs of the organization being evaluated, sound organizational principles should guide the development of organizational structure. The following organizational principles provide the framework that guides Berkshire Advisors’ approach to organizational design:
First and foremost, organizational structure should be designed to facilitate efforts to accomplish the organization’s stated purpose and objectives. Organizational structure should facilitate decision-making, planning, and performance monitoring. Organization structure should focus management attention on priorities Because organizational structure sends a message about what is important to a organization it is often useful to establish an organizational locus for key initiatives With regard to spans of control, the complexity of the functions being performed is the primary determinant of the number of positions that can be effectively supervised As a general rule, responsibility for performing an activity should be assigned at the lowest point in an organization for which there is enough work to constitute an economic unit of production. Management systems should support and be compatible with structure; for example, if a highly decentralized structure is adopted, there should be stringent management controls and an effective early warning system to keep unit managers apprised of potential problems Structure and systems should not be overly complex; both should reflect the management style of key administrators Roles and responsibility of key administrators should be clearly defined, and accountabilities should be clearly established.
Systems, Procedures And Culture Must Be Considered When Designing Organizational Structure
It should also be remembered that organizational structure cannot be evaluated simply by looking at “boxes” on an organizational chart. Systems, procedures, and culture all affect what type of organizational structure should be put in place. For example, before a decentralized administrative structure can be effectively implemented, systems and procedures must be in place to monitor performance and hold managers of decentralized units accountable for achieving desired results. Likewise, spans of control are determined in part by the effectiveness with which expectations are communicated and performance monitored. (When asked what is the appropriate span of control for mid-managers Peter Drucker once replied, “It all depends. A ratio of one to seventy is appropriate for an orchestra leader because all the people supervised have the same score.”) When evaluating organizational structure therefore it is extremely important to consider all the factors that affect organization and to consider what “non-organizational” changes might be implemented both to improve operations and to reduce management and supervisory needs.
P2.3 The scale and size of civil engineering organization determines the type of organization and practices that it embraces to achieve the organizational objectives.
Discuss how the scale and size of construction contracts influence the selection of the right type of organizational arrangement to achieve the project objectives in terms of cost, time and quality. You may have the following organizational arrangements to be considered:
• Functional Organization
• Matrix Organization
• Project Organization
Developing a robust project delivery strategy can significantly affect the success of a large construction or infrastructure project. The appropriate delivery strategy typically drives project cost, quality of design, construction, long-term maintenance, and project completion date. Project owners planning large projects can improve their chances of success by performing a thorough assessment of the key objectives for the project and the delivery strategies available to execute it. The spectrum of project delivery strategies ranges from those where the owners are fully involved to where their involvement is minimal. In practical terms for example, the strategies can vary from those where the owner is an active participant in the initial design phase through commissioning and operations to those where the owner has minimal involvement and relies on a turnkey contractor to coordinate all aspects of the project, including its long-term maintenance and operation. The project owner’s objectives and organizational characteristics dictate the available project delivery strategies. In all cases, the most appropriate delivery strategy will also depend on the specific project and circumstances
Selecting the most appropriate project delivery strategy is only one of the many activities and decision points a project owner will face over the course of a major capital project. It is, however, one of the most important, affecting not only the project outcome but also the owner’s internal management, support structure and the health of its relationship with all other project stakeholders. The project owner’s culture has a significant influence on the appropriate choices for project delivery strategy. The desire to understand and limit its risk by taking the project “one step at a time” might lead the project owner to select a more traditional approach. An active project owner with a “hands-on” approach, who doesn’t mind sharing project risk in a transparent and open manner, is likely to be more comfortable with the collaborative and integrative models of project delivery. If the project owner works in an organization with stable needs that is looking for a solution that transfers project risks both in the short term and in the long term, it may choose the partnership delivery model. Each project delivery method has advantages and disadvantages. This paper will focus on the factors a project owner should consider before selecting a project delivery strategy for a large capital construction or infrastructure project. The paper will explain how those selection factors can influence the timeliness, quality, and cost of a large project and encourage responsible stewardship over the long-term.
The scale and size of civil engineering organization determines the type of organization and practices that it embraces to achieve the organizational objectives. The following organizational arrangements to be considered:
a) Functional Organization: A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing. Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.
In other word Functional organization is suitable for large projects as the works are needed to be divided among expert employees to get the most result. And it’s not suitable for small projects as it would cost much. For example, all engineers may be in one engineering department and report to an engineering manager, but these same engineers may be assigned to different projects and report to a different engineering manager or a project manager while working on that project. Therefore, each engineer may have to work under several managers to get his or her job done.
b) Matrix Organization: It is a type of organizational structure in which people with similar skills are pooled for work assignments, resulting in more than one manager (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts). A lot of the early literature on the matrix comes from the field of cross functional project management where matrices are described as strong, medium or weak depending on the level of power of the project manager.
Some organizations fall somewhere between the fully functional and the pure matrix. These organizations are defined in A Guide to the Project Management Body of Knowledge as composite’. For example, even a fundamentally functional organization may create a special project team to handle a critical project.
However, today, matrix management is much more common and exists at some level, in most large complex organizations, particularly those that have multiple business units and international operations.
c) Project Organization: Organizational project management is the systematic management of projects, programs, and portfolios in alignment with the achievement of strategic goals. The concept of organizational project management is based on the idea that there is a correlation between an organization's capabilities in project management, program management, and portfolio management, and the organization's effectiveness in implementing strategy. As businesses change at a faster rate, it is becoming increasingly important to execute on projects. Additionally, due to the broad nature of much of the change, projects are affecting larger parts of the organization. Therefore, just as the need to perform projects is increasing, the complexity in executing them is also increasing. Organizational project management draws from the broad base of project management and organizational design applications to understand the organizational processes that affect the ability to manage the delivery of projects.(16)
These points are already explained in further details the [Task 2.1]
Conclusion: In short among the mentioned organization structures Functional and Matrix Organizational structure is mostly suitable for large project, It is a very common since that large projects requires more resources to complete the work, and with that it also need well management. And these will not be efficient in the smaller project. By the term not efficient I mean this will be wastes of resources if we use these in the small projects. And lastly the project organization is suitable for medium and smaller projects. And it is effective as well.
3.1. a) Written explanation of the use of planning in the management of construction of 2-storied house
1) Draw a network diagram to illustrate the sequence of events
2) Identify the critical path. Assuming the absence of labor constraints, calculate the minimum time needed to complete the project.
3) A hold up in supplies results in a delay in the commencement of:
i) Activity B by 4 days;
ii) Activity I by 5 days
iii) Activity G by 10 days
In each case state with reasons, whether the delay leads to a failure to complete the project in the minimum time;
Planning is a bridge between the experiences of the past projects and the proposed actions that produces favorable results in the future. It can also be said that it is a precaution by which we can reduce undesirable effects or unexpected happenings and thereby eliminating confusion, waste, and loss of efficiency. Planning involves prior determination, specification of factors, forces, effects and relationships necessary to reach the desired goals.
(15)Construction planning is a fundamental and challenging activity in the management and execution of construction projects. It involves the choice of technology, the definition of work tasks, the estimation of the required resources and durations for individual tasks, and the identification of any interactions among the different work tasks. A good construction plan is the basis for developing the budget and the schedule for work. Developing the construction plan is a critical task in the management of construction, even if the plan is not written or otherwise formally recorded. In addition to these technical aspects of construction planning, it may also be necessary to make organizational decisions about the relationships between project participants and even which organizations to include in a project. For example, the extent to which sub-contractors will be used on a project is often determined during construction planning.
Forming a construction plan is a highly challenging task. As Sherlock Holmes noted:
Most people, if you describe a train of events to them, will tell you what the result would be. They can put those events together in their minds, and argue from them that something will come to pass. There are few people, however, who, if you told them a result, would be able to evolve from their own inner consciousness what the steps were which led up to that result. This power is what I mean when I talk of reasoning backward.
Like a detective, a planner begins with a result (i.e. a facility design) and must synthesize the steps required to yield this result. Essential aspects of construction planning include the generation of required activities, analysis of the implications of these activities, and choice among the various alternative means of performing activities. In contrast to a detective discovering a single train of events, however, construction planners also face the normative problem of choosing the best among numerous alternative plans. Moreover, a detective is faced with an observable result, whereas a planner must imagine the final facility as described in the plans and specifications.
In developing a construction plan, it is common to adopt a primary emphasis on either cost control or on schedule control as illustrated in Fig. 9-1. Some projects are primarily divided into expense categories with associated costs. In these cases, construction planning is cost or expense oriented. Within the categories of expenditure, a distinction is made between costs incurred directly in the performance of an activity and indirectly for the accomplishment of the project. For example, borrowing expenses for project financing and overhead items are commonly treated as indirect costs. For other projects, scheduling of work activities over time is critical and is emphasized in the planning process. In this case, the planner insures that the proper precedence’s among activities are maintained and that efficient scheduling of the available resources prevails. Traditional scheduling procedures emphasize the maintenance of task precedence’s (resulting in critical path scheduling procedures) or efficient use of resources over time (resulting in job shop scheduling procedures). Finally, most complex projects require consideration of both cost and scheduling over time, so that planning, monitoring and record keeping must consider both dimensions. In these cases, the integration of schedule and budget information is a major concern.
Planning should be done logically, thoroughly and honestly to have a chance to succeed. The previous experiences of projects provides basic planning logic. Then difference between previous projects and current projects shall be known to make any exceptional features in the basic planning logic. These differences can be unusual client requirement, out of the way location, potential external or internal delaying factors etc. these potential problems shall have to be tackled in order to reduce their negative effect preparing master plan of the project and later scheduling of the project. Provide each aspect of the plan an individual scrutiny with input from past experiences and from experts.
Types of Planning:
There are several types of project planning. The three major types of construction project planning are:
1. Strategic planning: this involves the high-level selection of the project objectives
2. Operational planning: this involves the detailed planning required to meet the strategic objectives
3. Scheduling: this puts the detailed operational plan on a time scale set by the strategic objectives.
Strategic planning is done by the owner’s corporate planners. In this they decide what project to build and what the completion date has to be to meet the owner’s project goals. The construction teams formulates the master construction execution plan within the guidelines set in the strategic and contracting plans.
Operational Planning:
Operational planning is done by construction teams. They ask certain questions before making operational plan for the project. They are:
• Will the operational plan meet the strategic planning target date?
• Are sufficient construction resources and services available within the company to meet the project objectives?
• What is the impact of the new project on the existing work load?
• Where will we get the resources to handle any overload?
• What company policies may prevent the plan from meeting the target date?
• Are usually long delivery equipment or materials involved?
• Are the project concepts and design firmly established and ready to start the construction?
• Is the original contracting plan still valid?
• Will it be more economical to use a fast-track scheduling approach?
The given data in the question is given below :
Operation Sequence of Activities: the activity is only possible after: Time
(days)
A 5
B A is completed 1
C A is completed 1
D C is completed 2
E Both B and D are completed 20
F E is completed 1
G C is completed 3
H F is completed 6
I A is completed 5
J G,H, and I are completed 6
And by following the data the activity network chart is drawn below.
The mathematical network analysis technique of planning complex working procedures with reference to the critical path of each alternative system is called critical path. According to the diagram the critical paths are “E=F=H=J”
i. Activity B by 4 days: For Activity B we have 2 days. So if it is late by 4 days, then it will surely delay the project completion time by 2 days.
ii. Activity I by 5 days: For Activity I we have 26 days to complete the task, so if we delay by 5 days it would not affect our progress.
iii. Activity G by 10 days: And for the Activity G we have 29 days. So if we start to work even 10 days late it would not affect the final result.
P3.2. Planning, scheduling and the project control are essential and important aspects of project management. Also, you may agree that these aspects are inter-related in a construction project. Considering these components are vital for successful completion of any project:
a) Explain how project procurement, scheduling and control are managed in a project of your organization
(Hint: look at these aspects from the point of client/owner and contractor and the project life cycle)
Planning, scheduling and the project control are essential and important aspects of project management. Also, you may agree that these aspects are inter-related in a construction project. Considering these components are vital for successful completion of any project
(17)Project Planning
The Project Plan is a document explaining the high level details of the proposed project. Key stakeholders of the project are heavily involved in the process of developing the Project Plan. The building of the Project Plan helps the Project Manager solicit information from the team and the vendor concerning the issue at hand and the possible solutions. Feature requirement lists are created, demonstrations are scheduled to find a solution that fits the needs of the team, cost estimates are bundled together, scope and assumptions are defined, risks are noted, and a preliminary timeline is built. This phase may also include a “proof of concept” where test environment(s) are acquired and set up to determine which particular product or package will work best within the confines of our environment. Once a product has been selected to solve the business issue, the Project Plan document can be completed with the scope, cost, and timeline of the project. All relevant stakeholders should have had input into the document and by this point in time, we should be within ±10% concerning Time, Scope and Cost of the implementation of this project. The Project Plan should also include a Communication Plan, resource responsibility matrix Risk Management Plan, HR Plan, and a Change Management Plan.
Once the Project Plan has been signed by the team, the Project Manager, and the IT Director directly affected by the implementation of the project, the Executive Project Summary document can be sent to the appropriate approver(s). The signing of the Executive Project Summary signifies that the project has been approved for procurement and implementation and the Project Charter can then be sent out.
As with any planning document, the Project Plan is a living document and will be updated periodically as the project progresses. The deliverable from the Project Plan is the Project Work Breakdown Structure.
Project Charter
The Project Charter is the document that announces the start of a project and the resources who will be working on the project. The Project Charter is sent to all relevant stakeholders asking for their cooperation in the project.
Procurement
The procurement process begins with the securing of funds during the Business Justification process. Once a project has been approved, the contract from the vendor can be routed through the Contract Routing process
.
• Triple Constraint Triangle
• HR Plan
• Communication Plan
• Change Management Plan
• Risk Management Plan
• Review Gate
Triple Constraint Triangle
The grid below prioritizes the critical project dimensions and is used to negotiate changes during the course of the project. The first step is to specify the constraining dimension. Is the critical project driver scope, cost, quality, or time? The second step is to specify the dimension that could accept change. If change is required, in which area are the key stakeholders most willing to accept change: scope, cost, schedule, or quality? Change must be accepted in at least one dimension. This is specified in the Vary column below. Remaining dimensions are then minimized or maximized. These dimensions will be utilized for all aspects of the project, unless explicitly stated in a sub-project definition.
A balance exists between the four project dimensions and a change in one will impact the other dimensions. For example, if the scope dimension increases then the schedule and cost dimensions will also increase to maintain the quality dimension. If the scope dimension increases, but schedule and cost stay the same then the quality dimension may decrease.
The project dimensions are specified below, with Constrain in at least one dimension and vary in at least one dimension:
Project Dimension Minimize/Maximize Constrain Vary
Scope X
Cost Minimize X
Schedule Minimize X
Quality X
One way to read the dimension grid above would be to say the following:
Delay in implementing the proposed solution will have a negative ripple effect on our ability to meet strategic goals to improve our operational efficiencies as well as customer service goals. There are also primary windows of opportunity for implementation that fall between major processes where in implementation workload is more effectively managed. The goal would be to time implementation so that students will most immediately notice the positive changes. Preferred implementation “go live” goals would be for Fall assignments process or Spring semester opening. We are targeting the Fall Assignments process.
Temporary help or temporary reassignment of current staff may be required to manage work load leading up to implementation milestones.
Scope
Scope Planning-
Creating a project scope management plan that documents how the project scope will be defined, verified, controlled, and how the work breakdown structure (WBS) will be created and defined.
The scope of the project includes the Vision, Mission, Background, major project activities for each phase of the project, planned process improvements, and out of scope activities critical to the success of the project.
Primary objectives (critical success factors) are also included within the scope of the project. The success of the project is measured against the attainment of the project objectives. As such, they must be measurable and have associated project success criteria.
The key benefits to ASU in achieving the objectives is also included within the Scope of the Project.
Planned Process Improvements :
All current and future business processes will be documented and reviewed. The Implementation Team will be focused on outcomes rather than current inputs or existing processes. The goal will be to implement the “Best Practices” contained in the (Software being implemented without modification. ASU Departments will adjust business processes as reasonably required to conform to best practices. Any exceptions will require the approval of the Angelo State University Project Sponsor.
The term “Best Practices” refers to the processes that are built into the software. By selecting the software system, ASU is adopting these “Best Practice” processes to replace their existing processes. Although some changes to the software processes may be required in unique circumstances, failure to limit these changes could impact the overall success of the project.
Assumptions concerning Resources, Priorities, Legacy Systems and Processes, Governance, Access, Training, Data Migration, Testing, Modifications to the system are also identified within the scope planning of the project definition document
Scope Verification-
The project team will be required to sign the PPD before project implementation can begin. This signifies the teams’ formal acceptance of the planned project deliverables.
Scope Control-
Many projects fail to come in on time, with this budget and cost due to scope. Scope is the adding of features and functions without addressing the effects on the time, costs, and resources, or without customer approval, any change to the scope during the implementation that will affect time, cost or scope will be required to be approved through the change management process.
Work Breakdown Structure
A deliverable-oriented hierarchical decomposition of the work to be executed by the project team to accomplish the project objectives and create the required deliverables. It organizes and defines the total scope of the project. Each descending level represents and increasingly detailed definition of the project work. The Work Breakdown Structure is decomposed into work packages. The deliverable orientation of the hierarchy includes both internal and external deliverables.
Cost
Within the PDD, an overall project budget is presented and denotes where funding for both the implementation of the project and ongoing maintenance will be derived from. A contingency fund of 10% of the total project implementation cost is always listed within the budget. The document defines who the Budget will be monitored and managed by, and who billing questions related to the project and invoices will be communicated directly to. (input sample budget here)
The WBS is used to create the Timeline for the project. The processes used to create the timeline are as follows:
Activity Definition - Identifying the specific schedule activities that need to be performed to produce the various project deliverables.
Activity Sequencing - Identifying and documenting dependencies among schedule activities.
Precedence Diagram Method
Based upon the activity sequencing above, one could diagram the activities as such:
Activity Resource Estimating - Estimating the type and quantities of resources required to perform each schedule activity.
Activity Duration Estimating - Estimating the number of work periods that will be needed to complete individual schedule activities.
Using the PERT Estimate, we can get a more precise calculation of estimated activity duration
Critical Path Method
Now that we have duration estimates, we can find the critical path of the project. Meaning, the longest sequence of activities that has to occur for the project to complete on time. These are the activities that must stay on track.
A + C + D + H + I = 80 DAYS
B + C + D + H + I = 69 DAYS
B + C + D + G + H + I = 72 DAYS
E + F + G + H + I = 63 DAYS
The Critical Path is ACDHI. Meaning that these items are dependent upon each other and are in the critical path of this project being completed on time.
Schedule Development- Analyzing activity sequences, durations, resource requirements, and schedule constraints to create the project schedule.
Schedule Control- Controlling changes to the project schedule.
To determine the actual Due Dates for each of these Activities, the Project Manager will request that the project team update the BlackOut Calendar for this project. The Blackout Calendar shows dates that Team members will be unavailable to work on the project. Once this has been done, the PM will enter your project start date and then base each activity due date upon the PERT estimate for that task as well as activity dependencies and the BlackOut Calendar.
Quality
As a project is undertaken to be implemented a standard for the level of quality will need to be set. Quality Assessment visits by consultants or by peers review may be initiated throughout the project to ensure the level of quality of both inputs and outputs are as they should be.
P3.3. Risk management means to take proactive steps to manage and limit risks. Similarly, project risk is related to the planning and delivery of product or services and not being able to meet the three project objectives- quality, time and cost.
Explain how quality control and risk management are managed to achieve the project objectives of your organization. (P3.3, D2.5)
Risk and quality management has been designated as two of the main areas of the Project Management Body of Knowledge (PMBOK) by the Project Management Institute, which is the largest professional organization dedicated to the project management field. The presence of risk creates surprises throughout the project life cycle, affecting everything from technical feasibility to cost, market timing, financial performance, strategic objectives and of course quality. Since all projects are exposed to risk, successful projects are the ones where that risk is properly managed. Systematic application of risk management methodology and its extension to the entire organization can provide a significant competitive advantage in an increasingly uncertain world. Every project has an anticipated level of quality for the project deliverables. The details and specifications set out by the customer determine what the expected level of quality is. But risk event can threaten planned quality. For that reason it’s necessary to manage both quality and risks in projects.
Risk is an uncertain event or condition that, if it occurs, has an effect on at least one project objective. Objectives can include scope, schedule, cost and quality. Outcomes of risky events can be both, positive and negative.
It is impossible to imagine a project without risk. Of course some projects will be high-risk, while others have less risk, but all projects are by definition risky to some extent.
Those involved with launching, sponsoring and managing projects in organizations should welcome risk in their projects, since it enables and supports change, innovation and creativity – as long as it is taken sensibly, intelligently and appropriately, and as long as it is managed effectively. It is also important to remember that not all risk is bad, since the concept includes both threats and opportunities. Within the project context, this means that there are uncertainties that matter because if they occurred they would hinder achievement of project objectives (threats), but there are also uncertainties whose occurrence would help to achieve those objectives (opportunities).
The risk of the project is characterized by three key factors, namely:
Risk event - phenomenon, activity or event that could have a negative impact on the project;
Probability of risk - the likelihood of the risk event;
The size of the stake - the size of the loss, which can occur when the event is achieved.
What projects makes risky?
There are numerous risks which can effect on project. Some of them can be presented in one of following groups:
• common characteristics of projects;
• external environment.
Factors in all projects which make them inherently risky include:
Uniqueness - Every project involves at least some elements that have not been done before, and naturally there is uncertainty associated with these elements;
Complexity - Projects are complex in a variety of ways, and are more than a simple list of activities to be performed. There are various kinds of complexity in projects, including technical, commercial, interfaces or relational, international project each of which brings risk into the project.
Assumptions and constraints-Project scoping involves making a range of guesses about the future, which usually include both assumptions (things we think will or will not happen) and constraints (things we are told to do or not do). Assumptions and constraints may turn out to be wrong, and it is also likely that some will remain hidden or undisclosed, so they are a source of uncertainty in most projects.
People - All projects are performed by people, including project team members and management, clients and customers, suppliers and subcontractors. All of these individuals and groups are unpredictable to some extent, and introduce uncertainty into the projects on which they work.
Stakeholders - These are a particular group of people who impose requirements, expectations and objectives on the project. Stakeholder requirements can be varying, overlapping and sometimes conflicting, leading to risks in project execution and acceptance.
Change - Every project is a change agent, moving from the known present into an unknown future, with all the uncertainty associated with such movement.
Some of environmental factors are:
Market volatility;
Competitor actions;
Emergent requirements;
Client organizational changes;
Internal organizational changes;
Political;
Economic;
Social;
Technological;
legal;
International;
Environmental;
Demographic factors.
How to manage risks in projects?
Although some risks can have positive impact on projects it is necessary to manage risks because mostly of them are harmful and can have negative influence on project.
The objectives of project risk management are to increase the probability and impact of positive events and decrease probability and impact of negative events in the project.
There are numerous approaches for risk management and in this paper will be presented PMBOK methodology Project risk management include following processes:
Plan risk management – this process is very important. In this process project manager should provide necessary resources and time for risk management activities. Result of this process is risk management plan which describes how risk management will be structured and performed on the project;
Identify risks – this process should determine which risks may affect the project and document their characteristics. This is permanent process because risks can appear through its life cycle;
Plan risk responses – each risk event may demand different responses. In this process we should develop options and actions to enhance opportunities and to reduce threats to project objectives;
Perform qualitative risk analysis – there are numerous risks but not all of them have same impact so it’s necessary to prioritize risks. This process allow it by assessing and combining risk probability of occurrence and impact;
Perform quantitative risk analysis – is the process of the numerically analyzing the effect of identified risks on overall project objectives.
Monitor and control risks – include implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness throughout the project. Project should be continuously monitored for new risks.
What are the possible strategies for risk response?
Risk response is the process of developing strategic options, and determining actions, to enhance opportunities and reduce threats to the project’s objectives. A project team member is assigned to take responsibility for each risk response. This process ensures that each risk requiring a response has an owner monitoring the responses, although the owner may delegate implementation of a response to someone else. Risk response strategies are presented in table 1. and it is divided into two groups.
AVOID - Risk can be avoided by removing
the cause of the risk or executing the project
in a different way while still aiming to
achieve project objectives. Not all risks can
be avoided or eliminated, and for others, this
approach may be too expensive or
time‐consuming. However, this should be the
first strategy considered. EXPLOIT - The aim is to ensure that the
opportunity is realized. This strategy seeks to
eliminate the uncertainty associated with a
particular upside risk by making the
opportunity definitely happen. Exploit is an
aggressive response strategy, best reserved
for those “golden opportunities” having high
probability and impacts.
TRANSFER - Transferring risk involves
finding another party who is willing to take
responsibility for its management, and who
will bear the liability of the risk should it
occur. The aim is to ensure that the risk is
owned and managed by the party best able to
deal with it effectively. SHARE - Allocate risk ownership of an
opportunity to another party who is best able
to maximize its probability of occurrence
and increase the potential benefits if it does
occur. Transferring threats and sharing
opportunities are similar in that a third party
is used.
MITIGATE - Risk mitigation reduces the
probability and/or impact of an adverse risk
event to an acceptable threshold. Taking
early action to reduce the probability and/or
impact of a risk is often more effective than
trying to repair the damage after the risk has
occurred. ENHANCE - This response aims to modify
the “size” of the positive risk. The
opportunity is enhanced by increasing its
probability and/or impact, thereby
maximizing benefits realized for the project.
If the probability can be increased to 100
percent, this is effectively an exploit
ACCEPTANCE - This strategy is adopted when it is not possible or practical to respond to the risk by the other strategies, or a response is not warranted by the importance of the risk. When the project manager and the project team decide to accept a risk, they are agreeing to address the risk if and when it occurs. A contingency plan, workaround plan and/or contingency reserve may be developed for that eventuality.
QUALITY
The Project Management Institute defines quality as “the degree to which a set of inherent characteristics fulfill requirements.” The set of inherent characteristics may be a product, processes or system. The requirements may be those of customers or stakeholders, an important group that is ignored at great peril to the success of the project. The essence of the quality concept is that product (goods or services) generated by the project of any organization should fulfill the stated and implied needs of the recipient.
Project quality is the factor that can significantly affect the possibility of risks appearing and the extent of these risks consequences. Project quality management is compatible with ISO 9000 and ISO 10000 quality standards and guidelines.
How to manage quality in projects?
Project quality management includes processes and activities of the performing organization that determine quality policies, objectives and responsibilities so that the project will satisfy for needs for which it was undertaken. It implements the quality management system through policy and procedures with continuous process improvement activities conducted throughout as appropriate. Product quality measures and techniques are specific to the type of product produced by the project.
Project quality management include next processes:
Plan quality – first step in quality management is to identify quality requirements and standards for the project and product. Planning should be parallel with other processes, because quality changes of product can effect on cost and schedule. For that reason it’s necessary to perform risk analysis;
Perform quality assurance – include auditing the quality requirements and the results from quality control measurements to ensure appropriate quality standards and operational definitions are used;
Perform quality control– monitoring and recording results of executing the quality activities to assess performance and recommend necessary changes. Control activities should identify causes of poor process or product quality and recommend and take action to eliminate them. In that way and possible impact of risk events can be decreased.
ISO 10006: 2003 provides guidance on quality management in projects. It outlines quality management principles and practices, the implementation of which are important to, and have an impact on, the achievement of quality objectives in projects.
This standard can apply to projects which can take many forms from the small to very large, from simple to complex, from being an individual project to being part of a program or portfolio of projects.
ISO 10006:2003 is not a guide to "project management" itself. Guidance on quality in project management processes is discussed in this International Standard. Guidance on quality in a project's product-related processes, and on the "process approach", is covered in ISO 9004. A new "Project Management - Guide to project Management" ISO 21500 has been published in September 2012. Since ISO 10006: 2003 is a guidance document, it is not intended to be used for certification/registration purposes.
CONNECTION BETWEEN RISK AND QUALITY IN PROJECTS
It can be said that the integration of risk management methodology and quality contributes to increasing the effectiveness of quality management, by emphasizing on the preventive nature of the decisions regarding strategies and measures for improvement.
Knowing the current state of the risk approach in quality management is important in establishing ways to extend the integration of risk into quality at all levels. In this regard, it should be noted that the risk lies in the quality management systems (QMS), whose philosophy is based on the principle of risk prevention. Thus, effective implementation and operation of the ISO 9001 QMS model provides the opportunity for organizations to consistently make product and process to defined parameters, implicitly, the existence of mechanisms and tools to prevent and reduce risk.
The integrated approach of quality and risk management is facilitated by the fact that ISO 9001 and ISO 31000 standards have elements and common principles, most important being the following:
Quality and risk are associated to management, which involves conducting systematic planning and controlling processes;
Quality management system and risk management system ensure consistency of project activities;
The use of specific and measurable indicators regarding quality and risk, to allow the substantiation of business decisions of improvement and organizational performance.
The most difficult problem in a systematic risk‐quality approach is related of staff skills, given that both quality management and risk management are based on specific concepts and methods and require special training.
Ref: (19),(20),(21),(22),(23),(24),(25),(26),(27)
Conclusion:
Every project is under constant risk threats and uncertainty, also its question until project closing will project quality satisfy customer expectations. From this can be concluded that is necessary to manage risk and quality in projects. If not, planed time, budget and quality can be unreachable.
Quality should be main project objective. Delivering project on time, within budget and without demanded quality does not mean a lot to the customer. Thus, quality is what customer wants and not what project manager makes.
There are different risk response strategies and cause every project is unique its necessary to apply appropriate strategy depend on situation.
Main common characteristic of risk and quality management is that both concepts attempt to reduce the negative impacts of the project activities and outcomes.
LO-4
P4.1 Evaluate the following procurement methods in terms of client and contractor risks:
o Measure and pay (unit rates x quantity)
o Traditional lump-sum contract
o Design build contract
o Private Finance Initiative/Public-Private Partnership Projects (PFI/PPP) (P4.1, D1.1)
Procurement is the acquisition of goods, services or works from an external source. It is favorable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the acquirer in terms of quality and quantity, time, and location.[1] Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.
Almost all purchasing decisions include factors such as delivery and handling, marginal benefit, and price fluctuations. Procurement generally involves making buying decisions under conditions of scarcity. If good data is available, it is good practice to make use of economic analysis methods such as cost-benefit analysis or cost-utility analysis.
An important distinction should be made between analyses without risk and those with risk. Where risk is involved, either in the costs or the benefits, the concept of expected value may be employed.
Direct procurement and indirect procurement
TYPES
Direct procurement Indirect procurement
Raw material and production goods Maintenance, repair, and operating supplies Capital goods and services
F E A T U R E S Quantity Large Low Low
Frequency High Relatively high Low
Value Industry specific Low High
Nature Operational Tactical Strategic
Examples Crude oil in petroleum industry Lubricants, spare parts Crude oil storage facilities
Based on the consumption purposes of the acquired goods and services, procurement activities are often split into two distinct categories. The first category being direct, production-related procurement and the second being indirect, non-production-related procurement.
Direct procurement occurs in manufacturing settings only. It encompasses all items that are part of finished products, such as raw material, components and parts. Direct procurement, which is the focus in supply chain management, directly affects the production process of manufacturing firms. In contrast, Indirect procurement activities concern “operating resources” that a company purchases to enable its operations. It comprises a wide variety of goods and services, from standardized low value items like office supplies and machine lubricants to complex and costly products and services; like heavy equipment and consulting services.
Measure and pay (unit rates x quantity): Unit Price Contracts is a procurement approach commonly used for construction projects. We develop an analytical model to study the optimal procurement quantity and monitoring intensity when the required quantities are uncertain. The optimum involves trading-off risking paying for more units than necessary and conducting costly renegotiations and/or monitoring. The paper adds to the understanding of both optimal behavior in procurements and the presence of cost-overruns. In particular, deliberately procuring low quantities, and thereby facing a high risk of cost-overruns, is sometimes optimal as it minimizes the expected total cost.
(35)Traditional lump-sum contract: A lump sum contract is a great contract agreement to be used if the requested work is well-defined and construction drawings are completed. The lump sum agreement will reduce owner risk, and the contractor has greater control over profit expectations. It is also a preferred choice when stable soil conditions, complete pre-construction studies and assessments are completed and the contractor has analyzed those documents. The stipulated sum contract might contain, when agreed-upon parties, certain unit prices for items with indefinite quantities and allowance to cover any unexpected condition. The time to award this type of contract is also longer; however, it will minimize change orders during construction.
Lump Sum Contract Advantages
A lump sum contract offers the following advantages:
• Low risk to owner.
• 'Fixed' construction cost.
• Minimize change orders.
• Owner supervision is reduced when compared to Time and Material Contract.
• Contractor will try to complete the project faster.
• Accepted widely as a contracting method.
• Bidding analysis and selection process is relatively easily.
• Contractor will maximize its production and performance.
Lump Sum Contract Disadvantages
This type of contracting has also limitations:
• It presents higher risk to contractor.
• Changes are difficult to quantify.
• The Owner might reject change order requests.
• The project needs to be designed completely before the commencement of activities.
• The construction progress could take longer than other contracting alternatives.
• Contractor will select its own means and methods.
• Higher contract prices that could cover unforeseen conditions.
(36)Design build contract: Universally, construction project owners, whether in the public, or private sectors seek timely and cost-effective construction. While there are a variety of views on how best to achieve schedule, budget, and quality, recently there has been a focus upon the method of construction project delivery. There are various construction project delivery systems, the most traditional of which is Design/Bid/Build ("DBB"). For generations, this was the predominately accepted means by which construction projects were developed and delivered. Today there is also a focus on the owner having one primary contractual relationship with an entity that is responsible both for the design and building of the construction project. This project delivery method is called Design/Build.
A. Advantages
1. Time Savings
By combining the selection of a designer and a contractor into one step, the D/B method eliminates time lost in the DBB process. Further, the D/B Contractor is able to start construction before the entire design is completed. For instance, the D/B Contractor can start excavation as soon as the foundation and utility relocation design has been prepared. Meanwhile, the Design professional can continue design work for the rest of the project during excavation.
2. Cost Savings
Potential costs savings can be realized with the D/B system because it has high value engineering capabilities due to the close coordination between the A/E and construction contractor. Construction contractors have direct and real experience with the cost of purchasing and installing materials and, in the D/B system, can share that experience directly with the Design professional during the Design Phase of the project. This process has the potential to translate into lower costs which savings can then be passed on to the Owner.
3. One Point of Contact - "One Stop Shopping"
The one point of contact feature for both design and construction is integral to the D/B system. The advantages of this feature are relative - having only one entity to deal with in many instances will outweigh the oversight benefits an Owner would otherwise get from contracting separately with an Design professional for the project design.
4. Fewer Change Orders
A definite advantage of the D/B system is that an Owner can expect far fewer change orders on a D/B project. However, if an Owner decides it wants a design change during the D/B project, and, that change is not covered by the defined scope of the project, that would be considered an extra. Still, in the D/B system, the Owner is not liable for any errors the Design professional makes because the Design professional is part of the D/B team.
5. Reduced Risk to the Owner
The shifting of liability for design quality from the Owner to the D/B Contractor is one of the most significant features of the D/B project delivery system. The advantage to the Owner is that it now knows from the outset the cost of that risk. As the D/B Contractor is in a better position than the Owner to manage and minimize that risk, this is a significant advantage of D/B contracting.
B. Possible Disadvantages to using the D/B Method
1. Loss of Control of Project Design
In the D/B system, the shift in responsibility for the design from the Owner to the Contractor implicitly includes some shift in control. The Owner should evaluate the degree to which this loss of control will affect the success of the project. If the Owner has specific needs or requirements, it should satisfy itself that it can clearly articulate them in defining the scope of work, or accept the risk that it will have to pay extra to get what it wants via the change order process. Change orders issued to revise scope are not inherently less likely or less expensive in the D/B project delivery method.
2. Less Project Oversight/Control of Quality
As has been discussed, one of the advantages of the D/B concept is the cooperation between the Design professional and the construction contractor because they both are part of the same team: the D/B Contractor. However, this feature can also be a disadvantage, as the architect is no longer the Owner's independent consultant and is now working with and for the contractor. For Owners who do not have their own design-proficient staff, the loss of the architect's input and judgment may expose them to quality control problems. The Owner considering design-build project delivery ignores this issue at its peril. If the Owner is one that is used to having the Design professional act as its agent, it should make plans to have another entity take that responsibility.
3. Suitability of Design-Build Teams
In the DBB methodology, while public agencies are bound by state law to hire the lowest responsive, responsible bidder for construction work, they have more flexibility in selecting designers for their projects. In other words, DBB public owners are allowed to take into account in the selection of a designer more than simply which candidate offered the lowest price. In D/B, the public Owner loses the latitude it had in DBB in selecting a design firm. True, the risk for adequacy of the design has been shifted to the D/B contractor, but that is little solace to an Owner if the finished project is structurally sound but operationally deficient.
III. When Design-Build Should Be Considered
When evaluating whether the D/B methodology would be appropriate for a given project, the following factors should be considered:
A. Schedule
If a project needs to be completed quickly, D/B is an appropriate project delivery system. As discussed previously, in the D/B system, the designer and the contractor are better able to coordinate their efforts to ensure that the work is completed in an expeditious manner. Moreover, another potential time-savings can be found in the administration of the change order process for correction of changes. Shifting the risk to the party best able to control it is one of the advantages of D/B. Controlling the risk of that change/correction process includes the ability to accomplish it more quickly.
B. Budget
Additionally, the D/B system offers several cost saving advantages for the budget conscious Owner. As discussed previously, cost savings can be realized by shifting more cost control responsibility to the Contractor. A construction contractor may have experience with materials and methods that meet the Owner's requirements but were not considered by the designer. If cost savings result from the contractor's input to the design, those savings should be passed on to the Owner. Additionally, value engineering proposals, for which the Owner may get only partial financial credit under DBB delivery, should be included in the D/B bid price and the entire savings passed on to the owner.
However, cost savings is not always cited as a major outcome of the D/B methodology. Public works projects usually do not have the "time is money" motivation to complete. For example, the sooner a school, library or transit system goes into service, the sooner it requires an operational subsidy.
C. Type of Project
The type of project may be the most significant factor in the choice between D/B and DBB. A good candidate for D/B is a project wherein the performance and form of the finished project is readily described in a scope document. On the other hand, a project in which the Owner has many specific and esoteric requirements would be a weaker candidate for this method. Extreme examples of each will help illustrate this point.
A good hypothetical candidate for the D/B system is a municipal sewage treatment plant which has been found to be in violation of EPA requirements for effluent and ordered by the court to treat its effluent to legal levels by a requisite date some months hence. Every day beyond that deadline that the effluent is out of compliance will cost the municipality in fines. What the Owner wants is to build a new facility in time to avoid those fines. It can probably write a single page performance specification that adequately describes what it wants, and just as importantly, when it wants it. A D/B Contractor with experience in the design and construction of similar plants is most likely to meet the needs of the Owner - a plant that removes the offending components from the plant's effluent stream in as short a time as possible.
An example of a project that is not suitable for the D/B system would be a research hospital. For a project like this, the end-user is going to have specific and esoteric needs that would be difficult to outline in a written scoping document. A facility such as this would be best designed by a Design professional, with direct and frequent communication with its client. Even then, one could expect change requests after construction had started.
Public–private partnership : (37)
A public–private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P3.
PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer. In other types (notably the private finance initiative), capital investment is made by the private sector on the basis of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by removing guaranteed annual revenues for a fixed time period.
There are usually two fundamental drivers for PPPs. Firstly, PPPs are claimed to enable the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector. Secondly, a PPP is structured so that the public sector body seeking to make a capital investment does not incur any borrowing. Rather, the PPP borrowing is incurred by the private sector vehicle implementing the project. On PPP projects where the cost of using the service is intended to be borne exclusively by the end user, the PPP is, from the public sector's perspective, an "off-balance sheet" method of financing the delivery of new or refurbished public sector assets. On PPP projects where the public sector intends to compensate the private sector through availability payments once the facility is established or renewed, the financing is, from the public sector's perspective, "on-balance sheet"; however, the public sector will regularly benefit from significantly deferred cash flows.
Typically, a private sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV.The consortium is usually made up of a building contractor, a maintenance company and bank lender(s). It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows make PPP projects prime candidates for project financing. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services while the hospital itself provides medical services.
Private finance initiative : (38)
The private finance initiative (PFI) is a way of creating "public–private partnerships" (PPPs) by funding public infrastructure projects with private capital. Developed initially by the governments of Australia and the United Kingdom, and used extensively there and in Spain, PFI and its variants have now been adopted in many countries as part of the wider program of privatization and financialisation driven by an increased need for accountability and efficiency for public spending.PFI has also been used simply to place a great amount of debt 'off-balance-sheet'.
PFI has been controversial in the UK; the National Audit Office felt in 2003 that it provided good value for money overall.[3] However more recently the Parliamentary Treasury Select Committee found that "PFI should be brought on balance sheet. The Treasury should remove any perverse incentives unrelated to value for money by ensuring that PFI is not used to circumvent departmental budget limits. It should also ask the OBR to include PFI liabilities in future assessments of the fiscal rules".
P4.2 Explain the use of under mentioned contracting methods to manage the construction projects (P4.2, M3.1)
o Traditional- Design-bid-build
o Design & Build
o Lump – sum
Traditional- Design-bid-Build: (28)
Design–bid–build (or design/bid/build, and abbreviated D–B–B or D/B/B accordingly), also known as Design–tender (or "design/tender") traditional method or hardbid, is a project delivery method in which the agency or owner contracts with separate entities for the design and construction of a project.
Design–bid–build is the traditional method for project delivery and differs in several substantial aspects from design–build.
There are three main sequential phases to the design–bid–build delivery method:
a) The design phase
b) The bidding (or tender) phase
c) The construction phase
a) The Design Phase: In this phase the owner retains an architect (or consulting engineer for infrastructure works) to design and produce bid documents, including construction drawings and technical specifications, on which various general contractors will in turn bid to construct the project. For building projects, the architect will work with the owner to identify the owners needs, develop a written program documenting those needs and then produce a conceptual and/or schematic design. This early design is then developed, and the architect will usually bring in other design professionals including mechanical, electrical, and plumbing engineers (MEP engineers), a fire protection engineer, structural engineer, sometimes a civil engineer and often a landscape architect to help complete the construction drawings and technical specifications. The finished bid documents are coordinated by the architect and owner for issuance to general contractors during the bid phase. Design fees are typically between 5-10% of the total project cost.
b) The bidding (or tender) phase: Bidding can be "open", in which any qualified bidder may participate, or "select", in which a limited number of pre-selected contractors are invited to bid.
The various general contractors bidding on the project obtain copies of the bid (or tender) documents, and then put them out to multiple subcontractors for bids on sub-components of the project. Sub-components include items such as the concrete work, structural steel frame, electrical systems, HVAC, and landscaping. Questions may arise during the bid (or tender) period, and the architect will typically issue clarifications or corrections to the bid documents in the form of addenda. From these elements, the contractor compiles a complete bid (or "tender price") for submission by the establish closing date and time (i.e., bid date). Bids can be based on the quantities of materials in the completed construction (e.g., as in the UK with bills of quantities), the operations needed to build it (e.g., as in operational bills), or simply as a lump sum cost; however, these bid requirements are elucidated within the bid documents.
Once bids are received, the architect typically reviews the bids, seeks any clarifications required of the bidders, investigates contractor qualifications, ensures all documentation is in order (including bonding if required), and advises the owner as to the ranking of the bids. If the bids fall in a range acceptable to the owner, the owner and architect discuss the suitability of various bidders and their proposals. The owner is not obligated to accept the lowest bid, and it is customary for other factors including past performance and quality of other work to influence the selection process. However, the project is typically awarded to the general contractor with the lowest bid.
In the event that all of the bids do not satisfy the needs of the owner, whether for financial reasons or otherwise, the owner may choose to reject all bids. The following options become available to the owner:
Re-bid (or re-tender) the construction of the project on a future date when the owner's needs are met, such as when monies become available and/or construction costs go down.
Abandon the project entirely.
Issue a work order to have the architect revise the design (sometimes at no cost to the Owner, if previously negotiated), so as to make the project smaller or more efficient, or reduce features or elements of the project to bring the cost down. The revised bid documents can then be issued again for bid (or re-tendered).
Select a general contractor, such as the lowest bidder, or an experienced cost estimator to assist the architect with design changes aimed at cost reduction. This process is often referred to as value engineering. The revised bid documents can then be issued again for bid (or re-tendered).
Once the construction of the project has been awarded to the contractor, the bid documents (e.g., approved construction drawings and technical specifications) may not be altered. The necessary permits (for example, a building permit) must be achieved from all jurisdictional authorities in order for the construction process to begin. Should design changes be necessary during construction, whether initiated by the contractor, owner, or as discovered by the architect, the architect may issue sketches or written clarifications. The contractor may be required to document "as built" conditions to the owner.
In most instances, nearly every component of a project is supplied and installed by sub-contractors. The general contractor may provide work with its own forces, but it is common for a general contractor to limit its role primarily to managing the construction process and daily activity on a construction site (see also construction management).
During the construction phase the architect also acts as the owner's agent to review the progress of the work as it relates to pay requests from the Contractor, and to issue site instructions, change orders (or field orders), or other documentation necessary to facilitate the construction process and certify that the project is built to the approved construction drawings.
c) The construction phase:
Once the construction of the project has been awarded to the contractor, the bid documents (e.g., approved construction drawings and technical specifications) may not be altered. The necessary permits (for example, a building permit) must be achieved from all jurisdictional authorities in order for the construction process to begin. Should design changes be necessary during construction, whether initiated by the contractor, owner, or as discovered by the architect, the architect may issue sketches or written clarifications. The contractor may be required to document "as built" conditions to the owner.
In most instances, nearly every component of a project is supplied and installed by sub-contractors. The general contractor may provide work with its own forces, but it is common for a general contractor to limit its role primarily to managing the construction process and daily activity on a construction site (see also construction management).
During the construction phase the architect also acts as the owner's agent to review the progress of the work as it relates to pay requests from the Contractor, and to issue site instructions, change orders (or field orders), or other documentation necessary to facilitate the construction process and certify that the project is built to the approved construction drawings.
Potential problems of design–bid–build
• Failure of the design team to be current with construction costs, and any potential cost increases during the design phase could cause project delays if the construction documents must be redone to reduce costs.
• Redesign expense can be disputed should the architect’s contract not specifically address the issue of revisions required to reduce costs.
• Development of a "cheaper is better" mentality amongst the general contractors bidding the project so there is the tendency to seek out the lowest cost sub-contractors in a given market. In strong markets, general contractors will be able to be selective about which projects to bid, but in lean times, the desire for work usually forces the low bidder of each trade to be selected. This usually results in increased risk (for the general contractor) but can also compromise the quality of construction. In the extreme, it can lead to serious disputes involving quality of the final product, or bankruptcy of a sub-contractor who was on the brink of insolvency desperate for work.
• As the general contractor is brought to the team post design, there is little opportunity for input on effective alternates being presented.
• Pressures may be exerted on the design and construction teams due to competing interests (e.g., economy versus acceptable quality), which may lead to disputes between the architect and the general contractor, and associated delays in construction.
Benefits of design–bid–build
• The design team is impartial and looks out for the interests of the owner.
• The design team prepares documents on which all general contractors place bids. With this in mind, the "cheaper is better" argument is rendered invalid since the bids are based on complete documents. Incomplete, incorrect or missed items are usually discovered and addressed during the bid process in the form of addenda.
• Ensures fairness to potential bidders and improves decision making by the owner by providing a range of potential options. It also identifies new potential contractors.
• Assists the owner in establishing reasonable prices for the project.
• Uses competition both in the selection of the architect and the contractor to improve the efficiency and quality for owners.
Design & Build: (29)
Design–build (or design/build, and abbreviated D–B or D/B accordingly) is a project delivery system used in the construction industry. It is a method to deliver a project in which the design and construction services are contracted by a single entity known as the design–builder or design–build contractor. In contrast to "design–bid–build" (or "design–tender"), design–build relies on a single point of responsibility contract and is used to minimize risks for the project owner and to reduce the delivery schedule by overlapping the design phase and construction phase of a project. "DB with its single point responsibility carries the clearest contractual remedies for the clients because the DB contractor will be responsible for all of the work on the project, regardless of the nature of the fault".[1]
The traditional approach for construction projects consists of the appointment of a designer on one side, and the appointment of a contractor on the other side. The design–build procurement route changes the traditional sequence of work. It answers the client's wishes for a single point of responsibility in an attempt to reduce risks and overall costs. It is now commonly used in many countries and forms of contracts are widely available.
Design–build is sometimes compared to the "master builder" approach, one of the oldest forms of construction procedure. Comparing design–build to the traditional method of procurement, the authors of "Design-build Contracting Handbook" noted that: “from a historical perspective the so-called traditional approach is actually a very recent concept, only being in use approximately 150 years. In contrast, the design–build concept—also known as the "master builder" concept—has been reported as being in use for over four millennia."[2]
Although the Design-Build Institute of America (DBIA) takes the position that design–build can be led by a contractor, a designer, a developer or a joint venture, as long as a the design–build entity holds a single contract for both design and construction, some architects have suggested that architect-led design–build is a specific approach to design–build.
Design–build contractor
The "design–builder" is often a general contractor, but in many cases a project is led by a design professional (architect, engineer, architectural technologist or other professional designers). Some design–build firms employ professionals from both the design and construction sector. Where the design–builder is a general contractor, the designers are typically retained directly by the contractor. Partnership or a joint venture between a design firm and a construction firm may be created on a long term basis or for one project only.
Until 1979, the AIA American Institute of Architects' code of ethics and professional conduct prohibited their members from providing construction services. However today many architects in the United States and elsewhere aspire to provide integrated design and construction services, and one approach towards this goal is design–build. The AIA has acknowledged that design–build is becoming one of the main approaches to construction. In 2003, the AIA endorsed "The architect's guide to design–build services", which was written to help their members acting as design–build contractors. This publication gives guidance through the different phases of the process: design services, contracts, management, insurances, and finances.
Design–build institutes
In 1993, the Design-Build Institute of America (DBIA) was formed. Its membership is composed of design and construction industry professionals as well as project owners. DBIA promotes the value of design–build project delivery and teaches the effective integration of design and construction services to ensure success for owners and design and construction practitioners. The Design-Build Institute of America is an organization that defines, teaches and promotes best practices in design–build.
The Canadian Design-Build Institute (CDBI) describes itself as "The recognized voice of Design-Build practitioners in Canada, promoting and enhancing the proper utilization of Design-Build method of procurement and contracting
Debate on the merits of design–build vs. design–bid–build[edit]
The rise of design–build project delivery has threatened the traditional hierarchies and silos of the design and construction industry. As a result, a debate has emerged over the value of design–build as a method of project delivery.
Critics of the design–build approach claim that design–build limits the clients’ involvement in the design and allege that contractors often make design decisions outside their area of expertise. They also suggest that a designer—rather than a construction professional—is a better advocate for the client or project owner and/or that by representing different perspectives and remaining in their separate spheres, designers and builders ultimately create better buildings.
Proponents of design–build counter that design–build saves time and money for the owner, while providing the opportunity to achieve innovation in the delivered facility. They also note that design–build allows owners to avoid being placed directly between the architect/engineer and the contractor. Under design–bid–build, the owner takes on significant risks because of that position. Design–build places the responsibility for design errors and omissions on the design–builder, relieving the owner of major legal and managerial responsibilities. The burden for these costs and associated risks are transferred to the design–build team.
The cost and schedule reduction and decreased litigation associated with design–build project delivery have been demonstrated repeatedly. Researches on Selecting Project Delivery Systems by Victor Sanvido and Mark Konchar of Pennsylvania State University found that design–build projects are delivered 33.5% faster than projects that are designed and built under separate contracts (design-bid-build). Sanvido and Konchar also showed that design–build projects are constructed 12% faster* and have a unit cost that is 6.1% lower than design-bid-build projects. Similar cost and time savings were found in a comparison study of design–build, and design-bid-build for the water/wastewater construction industry, a peer-reviewed paper authored by Smith Culp Consulting that will be published in July 2011 by the American Society of Civil Engineers.[8] A benchmarking and claims study by Victor O. Schinnerer, one of the world's largest firms underwriting professional liability and specialty insurance programs, found that, from 1995–2004, only 1.3% of claims against A/E firms were made by design–build contractors.
Growth of design–build method
A 2011 study analyzing the design–build project delivery method in the United States shows design–build was used on about 40 percent of non-residential construction projects in 2010, a ten percent increase since 2005. The study was commissioned by the Design-Build Institute of America (DBIA) and was completed by RSMeans Reed Construction Data Market Intelligence.
A study from the US Department of Transportation claims that: "Design-build delivery has been steadily increasing in the U.S. public building sector for more than 10 years, but it is still termed experimental in transportation. To date, under Special Experimental Project 14 (SEP-14) the FHWA has approved the use of design–build in more than 150 projects, representing just over half of the States. The European countries visited have used design–build delivery for a longer time than the United States and provided the scan team with many valuable insights. The primary lessons learned on this scan tour relate to the types of projects utilizing design–build, the use of best-value selection, percentage of design in the solicitation, design and construction administration, third-party risks, the use of warranties, and the addition of maintenance and operation to design–build contracts."[10]
Criticisms of design–build
During the design–build procedure, the contractor is deciding on design issues as well as issues related to cost, profits and time exigencies. Whilst the traditional method of construction procurement dissociates the designers from the contractors’ interests, design–build does not. On these grounds it is considered that the design–build procedure is poorly adapted to projects that require complex designs for technical, programmatic or aesthetic purposes. If the designer/architect is 'kept' by the construction company, he probably will never push the envelope as to what might be possible. A notable design–build project that received significant criticism, not only for excessive cost but for environmental issues, was the Belmont Learning Center. The scandal involved alleged contaminated soil that caused significant delays and massive cost overruns. In Los Angeles, District Attorney Steve Cooley, who investigated the Los Angeles Unified School District’s Belmont project, produced a final investigative report, released March 2003.This report concluded that the design–build process caused a number of issues relating to the Belmont scandal:
Design–build does not make use of competitive bidding where prospective builders bid on the same design.
Criteria to select contractor is subjective and difficult to evaluate and to justify later. The design and price selected arouses public suspicion, true or not. This can lead to loss of public confidence.
It concluded the “design–build” approach and “mixed-use concept” together caused controversy, uncertainty, and complexity of the Belmont project which helped increase the potential for project failure.
Lump – sum: (30)
A lump sum contract (or stipulated sum contract) is the traditional means of procuring construction, and still the most common form of construction contract. Under a lump sum contract, a single ‘lump sum’ price for all of the works is agreed before the works begin.
It is generally appropriate where the project is already well defined when tenders are sought and changes are unlikely. This means that the contractor is able to accurately price the risk they are being asked to accept.
Lump sum contracts might be less appropriate where speed is important, or where the nature of the works is not well defined. Other forms of contract that might be more appropriate include measurement contracts (used where the works can be described in reasonable detail, but the amount cannot), cost reimbursement contracts (used where the nature of the works cannot be properly defined at the outset, often used where an immediate start on site is required), target cost contracts and so on (see procurement route for more information).
Lump sum contracts apportion more risk to the contractor that some other forms of contract and give the client some certainty about the likely cost of the works. The tender process will tend to be slower than for other forms of contract and preparing a tender may be more expensive for the contractor.
A lump sum contract does not give all the project risk to the contractor, and it is not a fixed price, or even a guaranteed maximum price. The price of a lump sum contract can change.
Mechanisms for varying the contract sum on a lump sum contract include:
Variations: These are changes in the nature of the works. Most contracts will contain provision for the architect or contract administrator to issue instructions to vary the design, quantities, quality, sequence or working conditions.
Relevant events: A relevant event may be caused by the client (for example failure to supply goods or instructions), or may be a neutral event (such as exceptionally adverse weather) and may result in a claim for loss and expense by the contractor.
Provisional sums: An allowance for a specific element of the works that is not defined in enough detail for tenderers to price.
Fluctuations: A mechanism for dealing with inflation on projects that may last for several years where the contractor tenders based on current prices and then the contract makes provisions for the contractor to be reimbursed for price changes over the duration of the project.
Payments to nominated sub-contractors or nominated suppliers.
Statutory fees.
Payments relating to opening-up and testing the works.
The better defined the works are when the contract is agreed, the less likely it is that the contract sum will change.
A truly 'fixed' price contract would not necessarily be in the interests of the client as it would require that the contractor price risks over which they may have no control, and which might not arise.
P4.3 Evaluate the impact of procurement techniques on construction project performance. (P4.3, D3.3)
Introduction: Project procurement has been described as an organized methods or process and procedure for clients to obtain or acquire construction products. The procurement of construction project is vast in scope because it involves the gathering and organizing of myriads of separate individuals, firms and companies to design manage and build construction products such as houses, office buildings, shopping complex, roads, bridges etc. for specific clients or “customers”. Master man, described project procurement as the organizational structure needed to design and build construction projects for a specific client. It is in a sense very true because the process of “obtaining” a building by a client involves a group of people who are brought together and organized systematically in term of their roles, duties, responsibilities and interrelationship between them. Apart from the traditional approach, there are now other “fast-tracking” or innovative procurement systems used by the construction industry worldwide. The different procurement systems differ from each other in term of allocation of responsibilities, activities sequencing, process and procedure and organizational approach in project delivery. These differences have invariably affected the project performance. Project performance has been defined as “the degree of achievement of certain effort or undertaking”. It relates to the prescribed goals and objectives which form the project parameters. From project management perspective, it is all about meeting or exceeding stake holders’ needs and expectations from a project. It invariably involves placing consideration on three major project elements i.e. time, cost and quality .
Construction Project Performance
Performance has been described as “the degree of achievement of certain effort or undertaking” (31). It relates to the prescribed goals or objectives which form the project parameters(32). From project management perspective, it is all about meeting or exceeding stake holders’ needs and expectations from a project. It invariably involves placing consideration on three major project elements i.e. time, cost and quality(31). Yates and Eskander (33)defined a successful project as a project that has been completed on schedule, within budget, within scope and satisfied the required quality.
Factors Influencing Choice of Procurement System The following criteria were used to examine client requirements and experts preferences for the performance of each procurement method as cited in [34-37] suggest employing the following criteria to establish a profile of the clients requirements: speed (during both design and construction); certainty (price and the stipulated time and knowledge of how much the client has to pay at each period during the construction phase); flexibility in accommodating design changes; quality (contractors reputation, aesthetics and confidence in design); complexity (client may specify particular subcontractor, or buildability analysis); risk allocation/avoidance; responsibility (completion of program, price, product quality, design and construction); price competition (covering such issues as value for money, maintenance costs and competitive tendering); and disputes and arbitration. Similarly, Arazi I., Mahmoud S. and Mohamad H.H. [38] analyzed project performance criteria using severity index method as follows; Construction cost; Construction time; Quality of finish project; Occupational health and safety; Level of technology; Environment friendliness; Contractor’s flexibility; Labor dependency; Quality of coordination by construction team; Contractor’s project management and Contractor’s capacity of manpower.
Project Procurement Systems Procurement systems have become an important issue in the construction industry because of two reasons. Firstly, the procurement of construction projects involves a series of processes that are interrelated and sequential. The effectiveness and efficiency of the processes have considerable impact on the success or failure of projects. Secondly, there are several procurement methods that are available for a developer to adopt in procuring a project. For this reason, one major challenge that the project developer faces is the method to adopt among the available procurement options . Ogunsanmi and Bamisele and Ashworth and Hogg. defined procurement method as the management of the total process involved in construction project delivery. It is also ways in which a client or a sub-client may procure a building or other construction work varied and complex. According to, different variants of procurement are available for meeting different clients' needs and projects specifics. A number of factors have to be taken into account in determining the best method for a specific project. The variants of procurement methods available today metamorphosized from the need to improve construction project delivery, that is, project completion within budget and time.
Danielemphasized that procurement methods is on optimizing all parameters involved in project delivery namely, time, cost and quality. Procurement of projects within these constraints has continued to be a challenge to the design team, the contractors, and managers of investments . Traditionally, construction projects starts with the client's brief on which designs are based. The Architect and engineers prepare designs, in collaboration with quantity surveyor who advises on the cost implications of design variables. Tender process afterwards produces the contractor for the execution of the work. On the award, the successful contractor executes the work as designed under the supervision of the consultants. Thus, the approach separates the design, tendering process and construction as separate tasks. This separation of
International Journal of Sustainable Construction Engineering & Technology (ISSN: 2180-3242)
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activities also led to sequencing of activities in which design is completed before construction commences. This became the traditional' sequence and it is now referred to as Design-Bid-Build Other variants of procurement method not following this format became the 'non-conventional' procurement method. Concepts of project delivery have been developed to compress the time required to realize a constructed facility which focuses on simplifying the project delivery process, with emphasis on optimizing the parameters (e.g. quality, cost, time of completion, meeting market needs, and safety among others). In non-conventional procurement methods, the grounds are gradually shifting from just meeting clients' needs into apportionment of risk, as the contractors are gradually taking their stance as business organizations with the aim of making optimum profits at the minimum risk, and this has led to the development of integrated methods of procurement which are hybrids of both traditional and non-conventional procurement methods classified construction procurement methods into two broad categories as: traditional procurement method, and non-conventional procurement method.
Traditional Procurement System According to Seeley and Kadiri and Odusami The main variants of traditional procurement method are: bills of firm quantities; bills of approximate quantities; drawings and specification; schedule of rates; cost reimbursement; and labor only. The traditional method as the name implies, is a project procurement method where the three sequential phases of design, bid and build are identified as separate tasks. It is traditionally referred to as the competitively bid contract. This method allows for all contractors that fill competent to bid for projects in a free and competitive atmosphere similar to competitive market environment. In a typical traditional approach, the client initiates the project and produces a written scope statement, identifying the project’s objectives and verifying the scope definition by the architect. The architect is responsible for defining the project scope in order to facilitate a clear assignment of responsibilities and to monitor the scope change control with the project team. The design team produces complete design documents before engaging the contractor, often affecting the quality by not taking into consideration build- ability, constructability and life-cycle costing. Certain conditions warrant the use of Traditional procurement as opined by Turner, these include when:
A program allows sufficient time;
Consultant design is warranted;
A client wishes to appoint designers and contractors separately;
Price certainty is wanted before the start of construction;
Product quality is required; and
A balance of risk is to be placed between the client and constructor.
Design and Build
This approach gives the client a single point of contact. However, the client commits to the cost of construction, as well as the cost of design, much earlier than with the traditional approach. In this method, the contracting organization is responsible for design and construction. In this system of procurement, all phases of a project, from conception through design and construction are handled by the same organization. This form of procurement has been used for the majority of process-oriented heavy industrial project. Projects using a design-build approach are designed and constructed by a single company or a partnership of companies. Several varieties of Design-Build have evolved including Design-Build-Maintain, Design-Build-Operate-Maintain, and Design-Build-Operate-Maintain-Warrant. Each version of Design-Build provides the government or owner with one source of responsibility for the project. Design-build can be specified in many different ways based on the magnitude of the project.
Management Contracting According to Seeley, Management contracting is a system whereby a main contractor is appointed, either by negotiation or in competition, and works closely with the team of professionals. Also, Oyegoke opined that “in a management contract, the permanent works are constructed under a series of construction contracts placed by the management contractor after approval by the client.” All physical construction is undertaken by sub-contractors selected in competitive bidding. This system usually has the main contractor called the management contractor who provides the management expertise in the construction of the project for a fee. This Manager is appointed at the inception or better still feasibility stage to join the client’s team of consultants, to help work out the design programme and site operations. He manages and co-ordinates the work packages to individual sub-contractors and equally provides on the site service, plant and equipment, amenities etc for the work. The fee paid to the management contractor depends on the nature and extent of the work done and not on the cost of the work. However, management contracting system is most appropriate for large and complex projects which exhibit particular problems that militate against the employment of fixed price contract procedures. Typical examples of which are: Projects for which complicated machinery and / heavy equipment are to be installed concurrently with the building works; Projects for which the design process will of necessity continue throughout most of the construction periods; Projects on which construction problems are such that it is necessary or desirable that the design and management team includes a suitably experienced building contractor appointed on such a basis that his interests are largely synonymous with those of the employer’s professional consultants. Though, there is a wide range of views as to the best procedures to be adapted in management contracting, but they usually incorporates the following activities and requirement: The management contractor is precluded from carrying out any of the physical works using directly employed labour; His role is primarily that of a planner, manager and organizer; The works are divided into packages agreed by the professional team and the management contractor as being most appropriate for the particular projects; The management contractor provides from his own resources the following: Site supervisor, technical and administrative staff to run the contract.
Construction Management Construction management is that group of services over and above the normal Architectural and Engineering services related to the construction programme executed during the pre – design, design and construction phases, that contribute to the control time, cost and quality of new facility. Professional construction management treats the project planning, design, and construction phases as integrated tasks. This approach unites a three –party team consisting of owner, designer, and construction manager in a non-adversary relationship, and it provides the owner with an opportunity to participate fully in the construction process . Construction Management is a fee-based arrangement in which the construction manager is responsible exclusively to the owner and acts in the owner’s interest at every stage of the project. He offers advice on: the optimum use of the available funds, control of the scope of work, project scheduling, avoidance of delays, changes and disputes, enhancing project design and construction qualities, and optimum flexibilities in contracting and procurement [48]. A prime construction contractor or funding agency may also be part of the team. The team works together from the beginning of design to project completion, with the common objective of best serving the owner’s interest.
Construction Management Under a construction management approach, professional expertise in the specialized areas of systems analysis, value engineering, "construct-ability" review, activities scheduling, procurement systems, and construction coordination and supervision is added to the capabilities of the traditional project team of client and architect. The involvement of a Construction Manager during the entire design process as a collaborative yet independent
member of the professional team helps ensure that every major design decision is balanced by proper analysis of its cost consequences, and impact on project schedule [48]. The role of the construction manager on a building project may vary substantially, and can be performed under a variety of contractual terms. The most traditional or purest form of construction management is that where the Construction Manager acts as the client’s agent as a professional consultant, providing estimating, cost control and scheduling services and undertaking administrative responsibilities during construction. Under this arrangement, all construction contracts are executed directly between the owner and contractors. The approach permits the construction work to be broken down into a number of trade contracts thereby eliminating the need for one or more "general" contractors. The elimination of the general contractor avoids a duplication of fees, cost mark-ups and general conditions costs otherwise incurred by the client.
Project Cost and the Effect of Certain Procurement System
Cost has been defined as the degree to which the general conditions promote the completion of a project within the estimated budget . It covers overall costs incurred from project inception to completion. This highlights the importance that has to be attached to every project management activity carried out through every stage of the project development up to completion. also argues that cost is not only confined to the tender sum and that it is the overall cost that a project incurs from inception to completion, which includes any cost arising from variations, modifications during construction period. These cost variables give indication of certain additional practices that when engaged in during the project management process would have both direct and indirect implications for the project cost performance.
The number and manner in which variation orders are issued by consultants during construction is an important practice to look at. Clients who often engage in the habit of agitating for numerous design changes before practical completion also play great role in the influences on project cost. The way contractors respond to variation orders may also have implications for the project performance. In predicting the performance of design-build and design-bid-build projects, identified certain variables that affect cost performance. These include: the number of repetitive elements contained in a project, the extent of design completion when bids are invited, and the level of paid up capital of contractors engaged. These variables bring to bear certain related practices that may affect the performance of project cost. For instance the kind of procurement method usually adopted by clients; traditional procurement or design and build will determine the extent of completion of designs to be used for bidding. Moreover the kind of project consultants selected by clients for design of a particular kind of project will also have influence on the way the design will be made (i. e. whether repetitive elements will be brought into the design or not).
The attitude of client towards the project cost will also determine whether he or she will adhere to the advice given by designers concerning the cost advantage of having repetitive elements in designs. How contractors are usually selected (i. e. always selecting through competitive tendering or negotiated tendering) will also determine the kind of contractors that are employed to execute the projects. The presence of certain features within a particular contract also goes a long way to determine the kind of contractors that would tender for the job and eventually win. For instance the availability of certain facilities (such as payment of advance mobilization by client) within a given building contract may attract contractors who have low level of paid up capital or low level of ability to pre-finance a project. The level of financial capability of the winning contractor would have bearing on project performance.
Project Quality and the Effect of Certain Procurement System
Construction quality is defined as “the totality of the features required to satisfy a given need; fitness for purpose. The extent to which projects are monitored, the experience of project consultants, quality and past performance record of contractors and the number of variation orders issued all have effect on quality. How all these factors can be competently coordinated would be relevant to achieving satisfactory quality performance. The project management team leader has the responsibility to ensure that these factors combine well to yield good quality performance.
Quality performance has been considered as a function of the procedures adopted during the construction process . Those procedures comprise the concept of procurement form and the method of tendering. The fragmented nature of the construction industry and the fact that every building project is unique places great responsibility on the project management team in setting up the building process that will bring the project to a successful conclusion. The emphasis here is on process and procedures having influence on quality of a building project. The subsequent issue that arises is how often project managers, having a sense of the uniqueness of every project, tailor certain procurement practices to correspond with the uniqueness of a project in order to yield good quality performance. Some of the procedures to be given recognition may therefore include the selection procedure of organizations required to perform the design and supervision and those responsible for the construction of the particular project too. Usually, the construction team would be appointed under competition through competitive tendering process. Sometimes, a contractor may be appointed by negotiation on the basis of a fee. In cases where the design and construction is done as a complete package, both may be let by competition.
The selection procedures applied to contractors are therefore by no means always the same. Different methods have different levels of impact on project success. For instance it was noted from previous research that “competitive tendering can adversely affect the outcome of major projects and the number of separate contracts is related to the chances of success; different selection methods will pose different levels of risk to the project team members” . The selection procedures adopted by clients for project consultants should also not be overlooked since less attention has been given to this aspect of project management by several research works.
Quality is considered as a very crucial issue in project development. opined that the importance of quality performance and safety at times surpass cost and time of delivery in civil engineering projects although, these factors are interrelated and interdependent. maintained that the issue of quality performance of construction projects in Nigeria has resulted in colossal waste of human and material resources and in most of the cases, the indigenous contractors are found culpable. The degree to which a project’s quality objective is attained which is subjectively measured on a ranking scale. In view of the numerous parties and factors whose requirements should be met, the several activities, actions, processes and techniques involved in meeting these requirements and the many individuals and bodies concerned with planning and implementing them, maintained that quality management is far more difficult to achieve in construction than in other industries.
Conclusions
a. That despite its problems and shortcomings which includes long and bureaucratic processes, lots of variation and change orders and the resultant disputes, the traditional system of procurement still remain most popular, prevalent and frequently used system.
b. That none of the selected procurement systems could be called ‘the best’ but one can be better than the other the other in term of specific performance.
c. Finally that among the selected procurement systems which are Construction management, Design and Build, Management contracting and Traditional system, the Design and Build is most cost effective as it gives no room to claims, extra and external managerial cost in form of consultancies on the part of both the client and contractor, legal cost is minimal because the procurement is single source. Also from the findings on quality, if quality slippage must be curtail the Construction Management system is the most appropriate as it ranked highest from the field survey.
Ref: (35)
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(34) https://www.academia.edu/4716096/EFFECT_OF_SELECTED_PROCUREMENT_SYSTEMS_ON_BUILDING_PROJECT_PERFORMANCE_IN_NIGERIA
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(37) http://en.wikipedia.org/wiki/Public%E2%80%93private_partnership
